State Tax Proposals

State Tax Proposals

State Sen. Kevin Miller, in announcing his bid for reelection, has put forth several proposals for state and local tax policy.

in some ways they combine proposals put forth by Gov. George Allen this year, but as a more coherent whole.

The governor proposed that the business and professional office license (BPOL) imposed by many localities in the state be phased out. Separately he proposed that lottery proceeds be returned to the localities. The governor would have sent general fund state funds to replace the BPOL tax for five years, leaving the localities without compensating funds in future years. y

This proposal seemed particularly perverse from Rappahannock’s point of view since the county imposes no BPOL and would therefore get no funds to replace it, but county citizens do pay into the pool of the state’s general fund from which replacement funds would have come.

Sen. Miller proposes also that the BPOL be eliminated, but would send lottery funds to all localities. Those with BPOL taxes could use the lottery proceeds to replace that source of tax revenue. Counties without a BPOL tax could have an equal share of lottery revenues to reduce local property taxes or for education or law enforcement.

That, at least, seems fairer. However, it is hard to take seriously any proposal to return 100 percent of lottery proceeds to localities. The state has kept all the proceeds from the lottery since it first came into existence. At first proceeds were used chiefly for buildings on the state’s college campuses. With the recession early in Gov. Douglas Wilder’s term the piocecds from the lottery were needed to balance the state’s budget without a tax increase. Later in the Wilder administration lottery proceeds were pledged to pay off bonds approved by the voters of the state for college buildings, state parks and state mental health facilities. Some lottery proceeds will continue to be needed for these purposes and perhaps for prison construction also.

A proposal to return a portion of lottery proceeds to the localities would be welcome. Rappahannock voters should consider carefully how the county’s share is determined. To have it based on the local composite index, as the governor proposed for last week’s veto session, would do the county very little good.

Furthermore, while the case has been made that the gross receipts portion of the BPOL is unfair, a simple flat license fee for businesses seems a reasonable way for localities to raise money and take some of the sting out of real estate taxes.

Sen. Miller further proposes, as Gov. Allen did, an increase in personal exemptions from state income taxes. The details are not spelled out, so it is not possible to tell if this is the same proposal. The personal exemption could be increased without such a drastic reduction in revenues from the state income tax, but to do so rates would have to be increased.

The state surely cannot afford to give up lottery proceeds and substantial amounts from the income tax in the face of rising costs for prisons and cutbacks in federal assistance without a dramatic drop in funds for almost all other state services.