A panel of state lawmakers has begun a serious review of Virginia’s tax credits, exemptions, deductions, and similar “preferences.”
The evaluation comes after the Joint Audit and Legislative Review Commission found that the tax breaks did not always perform as intended, were often inefficient, and cost the state billions of dollars in revenues.
Delegate Chris Jones said it’s clear that some tax breaks don’t meet policy goals.
“Five to maybe 13 percent of the benefit was received by the low-income taxpayer—because that was initially what the purpose was, to give those who had the biggest need a financial break in that regard.”
But members are concerned about the negative impact of eliminating tax breaks on struggling businesses or nonprofits. Delegate Ben Cline said one proposal to remove the sales tax exemption for services is problematic.
“Many of them are small businesses who pay income taxes now. And you’re asking whether they should pay both an income tax AND charge and collect and remit a sales tax as well for these same service," said Cline.
Delegate Tim Hugo said the best way to enact reform might be how Congress achieves base closures.
“They put everything into the pot, they made a decision, and it was an up or down vote. Because if you put this on the floor with the ability to pick it apart and all, it will fall of its own weight, " said Hugo.
One idea that’s gaining traction is putting an expiration date on date on more tax preferences so that the value added must be documented for renewal.