HJR 685/SJR 387
Joint Subcommittee to Study and Revise the State Tax Code
November 13, 2001, Richmond
The joint subcommittee heard presentations by several interested parties during its fourth meeting of the subcommittee's first year. Those organizations represented during the meeting were the Virginia Chamber of Commerce, the National Association of Retired Federal Employees (NARFE), the Home Builders Association of Virginia, and the Colony Condominium of Virginia Beach. Also, staff reported on questions that arose during earlier meetings of the subcommittee.
Interested Parties' Concerns
There are three issues of concern to NARFE. The issues, resulting from recommendations in the report of the Commission on Virginia's State and Local Tax Structure for the 21st Century ("Morris Commission"), deal with (i) eliminating the income tax special age deductions for those taxpayers over the age of 62 and 65; (ii) eliminating the additional personal exemptions from income tax based on age and blindness; and (iii) subjecting to the Virginia individual income tax those Social Security benefits that are reported as taxable income on federal income tax returns. Obviously, NARFE is opposed to all three. These recommendations are only three of many made by the Morris Commission in its report issued in January of 2001 concerning changes in Virginia's state and local tax structure, all of which, if adopted, should be revenue neutral.
The Virginia Chamber of Commerce had several recommendations and observations. In its written comments submitted to the subcommittee, the Virginia Chamber supports 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." Further, taxes should be few in number and easy to administer, with the burden shared among income, sales, and property taxes. There needs to be a balance between not stifling economic development and efficiently producing enough revenues to meet citizens' needs.
With regard to income taxes, the Virginia Chamber advocates neither a high marginal rate nor an excessive number of brackets. Conformity with the federal income tax should continue and additional tax preferences (exemptions, deductions, subtractions and credits) should be avoided as they add to the complexity of the tax for the taxpayers and the administrative burden for the Department of Taxation. Corporate income tax rates should remain competitive in order to keep businesses in Virginia and attract new ones.
Focusing on the sales tax, the Virginia Chamber supports participation by the Commonwealth in the streamlined sales tax project with the 42 other states that are currently part of the project. The purpose of the project is to create uniform definitions and address other administrative issues that will provide uniformity in and simplify the implementation of the sales tax across state lines.
Property taxes should continue to be the main locally imposed source of local revenues. While the Virginia Chamber is not ready to endorse the elimination of the property tax on personal cars and trucks, it also is not ready to dismiss such a proposal. However, such a change should be part of a reasonable, balanced and comprehensive revision package. Also, the Virginia Chamber opposes allowing localities to create a classification system for real property that would provide different tax rates for residential and commercial/industrial property.
With regard to the administration of taxes, the Virginia Chamber supports an appeals procedure that provides a simple, complete and fair resolution of all tax issues by administrative authorities and by an impartial court, if necessary, before any tax is paid. There should be a reasonable audit procedure conducted by government employees with adequate tools to permit the collection of fairly assessed taxes. On the other hand, taxpayers should have fair opportunities to contest liabilities that are not fairly assessed.
In general, the Virginia Chamber supports the following:
Finally, the Virginia Chamber opposes granting broad taxing powers to localities without General Assembly oversight and fragmenting the tax system so that the number of taxes and variation in the rates increase unreasonably, thereby creating a more burdensome and inequitable tax system.
The Colony Condominium association brought forth a business, professional and occupational license tax issue dealing with the payment of the tax by the association on the total assessments paid by the time-share unit owners. Previously, the BPOL tax was only levied on rental income commissions received by the association. The association filed an appeal with the Department of Taxation but did not receive a favorable finding and were left with going to court. They would like a legislative remedy instead of a judicial remedy.
The Home Builders Association of Virginia supports (i) property tax reform, (ii) revenue sharing of the state income tax with localities, (iii) the ability of local governments to impose new taxes within their boundaries, and (iv) equal taxing authority for counties and cities.
Staff Presentations and Next Meeting
Staff to the joint subcommittee presented answers to 13 questions that came out of the August 6, 2001, meeting. The detailed answers to those questions can be found at the study's website: www.dls.state.va.us/taxcode.htm.
The joint subcommittee will next meet in Richmond on December 17 at 10:00 a.m. in Senate Room A of the General Assembly Building to hear from more interested parties and to prepare its work plan for 2002. No legislation for the 2002 General Assembly Session from the subcommittee is currently anticipated.