Special Subcommittee Studying Business Tax Incentives

October 29, 1998, Richmond

The second meeting of the House Finance Special Subcommittee Studying Business Tax Incentives focused primarily on the recycling industry, because of that industry's interest in recently enacted tax credits and other business incentives, and because the subcommittee received a proposal from industry representatives. Also, there was discussion with an administration official attending the meeting concerning the administration's efforts to address this issue. Finally, the subcommittee decided to have a third meeting in December to consider possible legislation.

Recycling Industry Proposal

Representatives from the recycling industry are concerned about a tax credit and other business incentives which were made available to a new recycling company moving into the Commonwealth this year. It is not the competition that bothers the recycling industry; it is the unfair advantage created by the tax credit and other incentives, such as a monetary contribution from the Governor's Opportunity Fund and permitting and infrastructure assistance from the Commonwealth. They believe the incentives may do more harm than good to the industry overall.

As a way to show this harm, they proposed a study by an independent economics consultant, monitored by a joint legislative subcommittee. The consultant would collect and compare data from scrap recyclers and consumers concerning tons of material recycled, investments, margins and employment in the participating companies for five years before the study begins and three years after. The consultant would present his findings to the subcommittee, which would make its final report to the General Assembly and the Governor no later than the 2002 session.

A second part of the proposal suggested examining options with the business community to help "level the playing field" for the Commonwealth's existing businesses. Some options mentioned were an investment tax credit, which the Virginia Manufacturers Association supports, aid with permitting and infrastructure improvements, and expanded use of the Governor's Opportunity Fund.

A representative from the Department of Commerce and Trade explained that the administration has been talking with recycling industry representatives about how to fix this perceived problem. The department is in the midst of preparing suggestions for the Governor's Economic Development Plan, which will be released in December. It was suggested that part of the plan may address some of the concerns expressed by the recycling industry.

December Meeting

The subcommittee decided to wait before taking any action on the recycling industry's proposal. The next meeting was set for December 18th at 8:45 a.m. in Richmond. At that time, staff will have collected information concerning economics consultants and what the approximate cost would be to undertake a study like the one suggested by the industry. In addition, the Governor's Economic Development Plan should be available to the public by that time. With all of that information, the subcommittee can then determine what it needs to do in the way of legislation for the 1999 General Assembly Session.

The Honorable Joseph P. Johnson, Jr., Chairman
Legislative Services contact: Joan E. Putney