‘We have no choice but to make changes’
Published 10:05 am Wednesday, April 12, 2017
Over the last two weeks, I have written about a better way for the federal government to refocus tax policy in a way that will grow the economy and increase employment on the national level. This week, I write about how better we can also refocus policy on the state level.
On each level I find it more effective to address the needs of services, not on different cuts of the current “pie” of available revenue, but rather in growing the pie — the size of the economy.
This is best accomplished by more people working. This spreads the cost of government services over more families and, at the same time, reduces the need of those services because families will need fewer of those services.
Where Virginia is situated, we are within 500 miles of much of the nation’s population. We are ideally located to expand a business or start a business, yet in the last several years we have dropped from the best place to do business to the 12th best state. This is not acceptable. We can and must do better. We must review our tax policy to reignite our economy.
No one wants to pay taxes, but they are less upset when they believe the taxes are fair and equally applied. Businessmen and women feel the same way.
Unequally applied taxes cause resentment and stick out like a sore thumb when new businesses are considering coming to Virginia.
One of the issues that frequently arises is the issue of localities’ gross receipt tax. This is a tax on business just for doing business, with no consideration as to how profitable that business is.
This is best explained by the following example. Consider an automobile dealer that buys a car from the factory. He expects to make a profit when the car sells to a consumer.
Should the dealer make money on the sale, he should be taxed. However, at times the style or color simply makes it impossible to sell. The dealer then may end up selling below cost, yet he will have to pay the gross receipt tax on the car at the same time he’s losing money on the sale. No one in their right mind should consider that fair. If the gross receipt tax is removed, then we must look at a fairer tax to replace that revenue.
I am committed to work with localities to find a fair solution to this unfair tax.
Another tax that prospective employers, manufacturers particularly, do not like is an annual tax on the equipment needed. Many other states have reduced or eliminated this tax.
This has placed Virginia at a disadvantage when we are trying to attract manufacturing companies. Moving forward, we need to better address this issue.
During the summer and fall, the Senate Finance Committee will be reviewing these taxes as well as the tax rates that companies pay and how that compares to other states, particularly those around us. In the last several years, North Carolina has chosen to reduce their corporate tax rate.
Just a few years ago, their tax rates on businesses was 30 percent higher than Virginia’s. Today their tax rates are lower.
This gives them a great advantage when companies are seeking locations.
We have no choice but make changes if we are to return to the best state in which to do business.
Frank Ruff represents Lunenburg in the state Senate. His email address is Sen.Ruff@verizon.net.