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Virginia Taxes
Sales Taxes. The big problem in the sales tax area is the way it is structured. There is a sales tax on automobiles which is generally 3%. No local sales tax is permitted on automobiles. There is a sales tax on aircraft which is 2% of the full sales price, and again no local sales tax is permitted. There is a sales tax on boats which is 2% of the sales price up to a price of $100,000, and again no local sales tax is permitted. The regular retail sales tax is 3.5% with localities allowed to impose another 1%. There are over 400 current specifically and generally stated exemptions to the regular retails sales tax set out in 10 different sections of the Code of Virginia. There is a different tax with a decreasing rate on food purchased for human consumption other than prepared food. Why is the sales tax on boats limited while the sales tax on cars and airplanes is not? There is no logical reason for this difference. Why are the sales taxes on planes, boats and cars different from the basic retail sales tax? These are just large items sold at retail. Why are there over 400 exemptions in the retail sales tax? if not completely eliminated, most of the exemptions could be much more simply and generally stated to provide a more rational approach. Elimination, however, should be considered first, since exemptions for one person or group means higher taxes for another. Why is the sales tax for unprepared food for human consumption being eliminated, while prepared ready to eat food sold in the same location is subject to the regular sales tax and, if enacted in the locality, also the meals tax? All of the different exemptions in retail sales taxes and the difference in unprepared food for human consumption made it extremely difficult to program cash registers to meet the requirements. The costs of these inconsistencies and exemptions is high both in terms of possible additional revenue and administration, and you and I pay for it.
Income Taxes. In some ways Virginia's income tax is fairly simple. It is tied generally to the Federal income tax. Complications are gradually creeping in as more and more special credits and special deductions are added. Currently there are13 separate credits available to individual taxpayers. There are 23 voluntary contributions permitted to be made by application of the refund due an individual. There are 22 different credits available to corporations. Credits generally are not very effective. They are forms of government subsidies for certain types of activities. Usually they do not go to the intended recipients and do not have the intended effect. Primarily they do three things. They complicate the law and its administration. They hide what effectively are government programs. They encourage further complications since everyone with a special program or special consideration seeks to get a credit, and turning down credits for good causes is difficult once such complications are started since the actual cost of government is hidden. As regards the special voluntary contributions, they do not have any direct impact upon the amount of money collected by government, but they complicate the administration. All of these different voluntary contributions must be processed by the government. If people really want to contribute to these different charities, they should do so directly. In addition, since one charity may be no better than another, these provisions provide impetus for further complications and expenses.
Car Tax. Several years ago under Governor Gilmore legislation was passed to repeal the tangible personal property tax on automobiles. The proposal was a gimmick that was ill-conceived administratively in order to win popular support. Since the program provides for elimination of the tax on automobiles under a certain value, it appeals to many low and moderate income Virginians. However, the localities were not the ones with the surplus funds. The Commonwealth had the excess funds. Therefore, in order to keep from hurting localities, the legislation included means of determining the loss of revenue to localities and then for providing a state subsidy to make up for the loss. It would have been much more honest just to have cut state taxes, probably by lowering the income tax at the lowest marginal rates, and the administrative cost would have been much less.
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