SJR 347: Commission on the Revision of Virginia's State Tax Code and the Streamlined Sales Tax Project

July 15, 2003
Richmond

The commission, which held its first meeting for 2003 in Richmond, was created to follow-up on the work of the Hanger/McDonnell Commission (SJR 387/HJR 685, 2001; HJR 60, 2002).

Comments by Legislators

The meeting began with comments by the co-chairmen, Senator Hanger and Delegate Parrish, who spoke of the difficult task the commission faces in developing a tax reform plan that will bring Virginia’s tax code into the 21st Century. They emphasized that any changes that might be suggested must create a more equitable, efficient, and easy-to-understand system; one that takes into account the new economy based more on services than goods.

Two members of of the House Appropriations Committee addressed the commission regarding the spending side of the budget. They urged the commission to consider all its options in developing a fair and efficient tax policy plan in order for the state to have the funds needed to pay for the basic obligations it faces in the next biennium.

Staff Presentations

The commission heard from legislative staff and a National Conference of State Legislatures (NCSL) representative. Legislative staff reviewed the recommendations of the earlier Hanger/McDonnell Commission. Other issues that the Hanger/McDonnell Commission discussed during its two-year existence were also mentioned.

An area that received considerable attention was the individual income tax. The particular issues that received the most attention were the standard deduction, personal exemptions, tax rates, tax preferences (i.e., deductions, exemptions, credits), and conformity with the federal tax code.

Finally, staff presented a list showing the estimated fiscal impact of certain tax-related items. The list consisted of items that would cost the government money and those that would produce money for government services. Some of the items that would cost money:

Elimination of the local BPOL tax;
Phaseout of the sales tax on food;
Phaseout of the property tax on certain automobiles;
Repeal of the estate tax;
Elimination of the marriage penalty in the income tax;
Repeal of the accelerated sales tax payments by dealers; and
Continuation of the age deduction as it currently exists.

Those items that would produce money include:

Elimination of certain sales tax exemptions;
Reduction of certain income tax deductions, subtractions and credits; and
Increase in certain tax rates.

Streamlined Sales Tax Project

An NCSL representative gave a brief history of the Streamlined Sales Tax Project, including how it came about, what its purpose is, and where it currently stands. Basically, the issue involves requiring out-of-state retailers to collect the sales tax from consumers who owe the tax when they buy goods over the Internet and through catalogues. There currently are two federal cases that prohibit such collection due to the complexity of states’ sales tax systems and the burden it puts on out-of-state retailers to determine the tax owed. Therefore, the goal of the Streamlined Sales Tax Project has been to develop an agreement that the states can adopt and that simplifies the sales and use tax systems, allowing them to remain as useful cogs in the wheels of state taxes. Once enough states voluntarily adopt the agreement, it is hoped that Congress will grant the states the power to require all retailers, wherever they are located, to collect the sales and use taxes owed. One of the issues the commission will address is whether Virginia should adopt the Streamlined Sales Tax Agreement.

Work Plan

Delegate Parrish explained that the commission has four meetings in which to accomplish its task of state tax reform. To assist in the process there was some discussion regarding the possible use of subcommittees. Letters will be sent to the commission members once the co-chairmen determine what the best approach is for keeping to the schedule and following the charge given them in SJR 347.

Chairmen:
The Hon. Emmett W. Hanger, Jr.
The Hon. Harry J. Parrish

For information, contact:
Joan E. Putney
Division of Legislative Services

Website:
http://dls.state.va.us/sjr347TaxCode.htm

THE RECORD