Subcommittee to Study and Revise Virginia's State Tax Code
HJR 60 (2002)
HJR 685/SJR 387 (2001)
November 13, 2001
Meeting for the fourth time this year,
the joint subcommittee appointed to study and revise the state tax code
heard from several interested parties in its process of listening to concerns
about and suggested changes to the state tax code. This was the first
meeting that was opened up to interested group representatives and individuals
for the purpose of addressing the joint subcommittee about their specific
Presentations by Organizations' Representatives
Representatives from four organizations
and one individual addressed the joint subcommittee. The organizations
were the Virginia Chamber of Commerce ("Chamber"), the National Association
of Retired Federal Employees ("NARFE"), the Colony Condominium ("Colony"),
and the Homebuilders Association of Virginia ("Homebuilders"). The individual
was a taxpayer from the City of Newport News.
The Chamber favors a tax system that is
"equitable and broad-based and that fosters a favorable business climate,
encourages economic development and promotes prosperity for all Virginians."
It believes that the tax burden should be distributed mainly among income,
sales and property taxes. Finally, the tax system should be competitive
with other states'.
Property taxes should remain as the major
locally imposed source of local revenues. Any consideration of eliminating
the personal property tax on personally owned motor vehicles must be part
of a comprehensive revision of taxes and should include business-owned
cars and light trucks in order to be equitable. Consideration could even
be given to limiting property taxes to real property only; however, localities
should not be allowed to establish a different tax rate for residential
and commercial/industrial property.
With regard to sales and use taxes, the
Chamber recognizes (i) the validity and usefulness of a competitive single-rate
tax applied in a uniform manner on a statewide basis, and (ii) its importance
as a revenue source for state and local governments. The Chamber supports
Virginia's participation in the Streamlined Sales and Use Tax Project
in order to ensure uniform definitions and other administrative matters
that will simplify the implementation of the tax across state lines, if
and when that happens. Finally with regard to the sales and use tax, the
Chamber supports the exemptions that assist the business community while
at the same time calling for containment of numerous organizational exemptions
that narrow the tax base.
The income tax, according to the Chamber,
should not have high marginal tax rates nor an excessive number of brackets.
Business and personal rates should continue to be similar and conformity
with federal law should also continue. The corporate income tax rate should
remain competitive to keep businesses in Virginia, thereby providing employment
to numerous citizens. The numerous tax preferences (exemptions, deductions,
and credits) move the Commonwealth further out of line with the federal
tax law every time one is added and contribute to complexity in administration
The Chamber opposes any tax imposed on
taxpayers' gross receipts, such as the BPOL tax, but understands that
it is a substantial revenue producer for localities and would require
some means of replacement in order to be eliminated. Also, the administration
of local taxes should be uniform. Finally, an administrative appeals procedure
for all taxes that allows a simple, complete, and fair resolution of all
tax issues is vital to a fair tax system, according to the Chamber. Reasonable
audit authority should be granted and government employees should conduct
tax audits. Taxpayers must have fair opportunities to contest tax liabilities
that are unfairly assessed.
With regard to the Commonwealth's revenue
system, the Chamber supports consideration of (i) sharing a portion of
state income tax revenues with localities, (ii) transferring mandated
social and health services from the localities to the state, (iii) funding
fully the state's share of the Standards of Quality, and (iv) creating
special local financing authorities funded by taxes imposed by citizens
on themselves if the General Assembly fails to provide adequate funding
for transportation and infrastructure needs.
NARFE focused on two issues. The first
was the taxation of social security benefits, which it opposes vehemently.
Currently, such benefits are excluded from income at the state level.
The second issue involves the age deduction which allows certain elderly
taxpayers to annually subtract $6,000 ($12,000 if filed jointly) or $12,000
($24,000 if filing jointly), depending on age, in calculating their Virginia
taxable income. Again, NARFE sees any change in this as a tax increase
to be avoided at all costs. Many of the Commonwealth's elderly are on
fixed income and cannot afford a tax increase, according to NARFE.
The Colony, a Virginia Beach condominium,
had a problem with the BPOL tax being imposed on a common expenses fee
that was paid by unit owners. Legislation will be proposed during the
2002 Session to clarify that such fees should not be considered gross
receipts for purposes of the BPOL tax.
The final organization addressing the
joint subcommittee was the Homebuilders Association. The Homebuilders
support property tax reform if it helps the housing industry, which was
described as "the engine driving the U.S. economy" (one in eight jobs
in Virginia is related to the housing industry). The Homebuilders also
support revenue sharing of the state income tax with localities, the ability
of localities to impose new taxes on their taxpayers, and equal taxing
authority for cities and counties.
The final speaker, the individual from
the City of Newport News, described himself as "an outspoken critic of
the property tax system." His concerns focused on helping the little guy.
He pointed out that there is no definition in the Code of Virginia or
in the Manual for Local Boards of Equalization of "equalization." Therefore,
his concern was that members on local boards of equalization do not know
what the term means and cannot properly carry out their duties. The other
major concern was how unfair the personal property tax assessments and
the appeals process are.
Finally, the joint subcommittee discussed
its upcoming final meeting for 2001. Several more organizations will address
the joint subcommittee at that meeting and the 2002 work plan will be
developed. This final meeting is scheduled for December 17 in Senate Room
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