City ditches tax to attract more factories

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Print this page by Zak Kozuchowski

Virginia Beach plans to phase out a business tax over the next three to five years, a move that officials believe will give the city a “unique tool” in attracting new manufacturers.

City Council voted to drop its machinery and tools tax, which is estimated to generate $1.46 million in revenue this fiscal year. Under the plan suggested by Mayor William Sessoms, the tax will be cut by a minimum of 20 percent a year until it’s eliminated.
“There’s a misconception that manufacturing is still not active in the U.S., let alone in Virginia Beach,” says Warren Harris, the city’s director of economic development. “It’s an important element of our community. It’s more high-performance manufacturing and automation than in years past, but there’s still a significant amount of manufacturing going on in the city.”

Harris says reducing the machinery and tools tax will put Virginia Beach in a favorable position to attract and maintain manufacturers.

Stihl Inc., which produces chainsaws and other power equipment, pays about $500,000 in machinery and tools taxes each year, more than any other Virginia Beach company. Karl Angler, Stihl’s vice president of finance, says the company was “pleasantly surprised” with the city’s decision to phase out the tax.

“In order to remain competitive domestically in the U.S. and to export our products, we need to be technically innovative, which means investing a lot of money,” Angler says. “Any tax increase burdens innovation.” He adds that removing the tax makes Stihl more competitive.

Councilman Harry E. Diezel wants the city to keep track of any new jobs created by the tax cut. He was skeptical of the impact that the phase-out will have because the tax does not affect a large number of companies or bring in much revenue.

“The premise we’re getting in the business [community] is that it will spur employment and bring jobs to the area,” he says. “But we’re taking a wait-and-see attitude to see if it does stimulate growth.” 

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