Joint Subcommittee to Study and Revise Virginia's State Tax Code

HJR 60 (2002)
HJR 685/SJR 387 (2001)

June 24, 2002

Task Force #1

Task Force #1 met for the second time on June 24, 2002, in Richmond at the General Assembly Building. The focus of the meeting was on the state tax issues, primarily dealing with the income tax, that the task force was assigned.

Staff presented an issue brief for each of ten income tax issues that described each issue, how the current law affects each issue, the suggested change in the law to deal with each issue, and any revenue impact resulting from the proposed change. The income tax issues included:

1. Conforming to federal law;

2. Eliminating the age deduction;

3. Increasing the standard deduction;

4. Providing a "personal exemption" tax credit or increasing the personal exemption amount;

5. Adopting two tax brackets--one with a five percent rate on the first $50,000 of taxable income and one with a five and three quarters percent rate on taxable income above $50,000;

6. Taxing social security income;

7. Increasing the tax credit for low-income taxpayers and making it refundable;

8. Eliminating the state income tax and replacing it with a higher sales tax;

9. Examining tax preferences (subtractions, deductions, tax credits); and

10. Overwithholding of income tax.

The task force decided to remove two of the issues from further consideration and make no changes in the current law. The two issues were numbers six and eight above. It was determined that taxing social security income (#6) was not good policy or politics. Eliminating the state income tax (#8) was also seen as bad policy because the sales and use tax rate would have to be more than threes times what it currently is (assuming all of the sales and use tax exemptions remain in effect) to raise the same amount of revenues that the income tax raises.

The remaining issues were discussed at length but no absolute decisions were made regarding their outcome other than all of them are still being considered. There also was some discussion on rate reductions that could result if some or all tax preferences were eliminated. More information regarding the fiscal impact for each issue will be gathered and presented during Task Force #1's next meeting on July 16 in Senate Room A at 10:00 a.m. In addition, the task force will take up their remaining issues that include the elimination of the car tax and the revision of the state and local telecommunications taxes. [Another joint subcommittee (HJR 209, 2002), chaired by Delegate Preston Bryant, is working on recommendations regarding the telecommunications taxes and plans to present them to the joint subcommittee studying the state tax code.]


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