- Associated Press - Thursday, December 3, 2015

RICHMOND, Va. (AP) - Gov. Terry McAuliffe said Thursday that he wants to lower the state tax rate for corporations, saying the move is necessary to make Virginia more competitive with other states.

At a Virginia legislative preview sponsored by The Associated Press, McAuliffe said he wants to lower the current corporate tax rate from 6 percent to 5.75 percent, while increasing tax credits for corporate research and development spending and investing in startups.

Luring companies to relocate or expand in Virginia has been a top priority for the Democratic governor, who noted that North Carolina’s corporate tax rate is slated to be 4 percent starting next year.

“I am constantly in meetings negotiating getting businesses to come to Virginia,” McAuliffe said. “The first question we always get is, ‘What is your tax rate?’”

Virginia’s corporate tax rate is lower than that of most of its direct neighbors, but is higher than many other Southern states the state often competes with for deals.

McAuliffe will present a formal biennial budget to state lawmakers on Dec. 17. That budget will be a starting point for negotiations with the Republican-controlled General Assembly, with the final product likely looking much different than what the governor proposes.

GOP Del. S. Chris Jones, chairman of the House’s budget committee, said it was premature to comment on one aspect of the budget without seeing the entire proposal.

The state’s revenues have been stronger than earlier projections, meaning the governor and lawmakers will have more money to work with when fashioning a budget.

McAuliffe said the corporate tax rate reduction would cost $64 million over a two-year period.

The governor declined to provide specifics about other parts of his proposed budget, but indicated he plans a “dramatic” increase in K-12 education spending and reiterated his support for expanding Medicaid eligibility to able-bodied, low-income Virginians.

State Republicans oppose Medicaid expansion, which would be largely funded by the federal government, and have blocked expansion efforts since McAuliffe took office last year.

Medicaid expansion is a key part of President Barack Obama’s health care law but a U.S. Supreme Court ruling made it optional for states. More than half of the states have expanded Medicaid.

On Thursday, the Virginia Hospital and Healthcare Association, which supports Medicaid expansion, said its members would be willing to pick up the state’s share of paying for expanding Medicaid. Hospitals in other states where Medicaid hasn’t been expanded have made similar proposals.

McAuliffe said he welcomes the proposal, which he said would make it possible for Virginia to provide health care coverage to 400,000 low-income Virginians at no cost to the state.

But Republican lawmakers said Thursday that they remain opposed to expanding Medicaid, which they view as a potential budget buster.

House Majority Leader Kirk Cox said states that have already expanded Medicaid are likely to reconsider and the GOP in Virginia will focus on reforming the existing Medicaid program.

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