by Keith Hall, Robert Greene
September 26, 2013
In the aggregate, Virginia weathered the Great Recession and the dismal recovery much better than the nation as a whole. However, the state has two distinct labor markets: a fully private one and a second one that is both directly and indirectly supported by government spending. We estimate that about 30 percent of state employment relies on government spending, and this portion of the labor market flourished during the recession. The remaining 70 percent of Virginia’s labor market has performed about as poorly as the rest of the country since 2007. Eliminating Virginia’s corporate income tax, reforming the personal income tax, lowering regulatory burdens on low-income entrepreneurs, and eliminating the state’s wasteful sales tax loopholes and enterprise zone program would create opportunities for increased private-sector growth and employment.