The two gubernatorial candidates in November’s election have distinct visions for the future of the state, though a glimpse at their positions shows one thing that’s remarkably similar: both have identified three local taxes as targets for reduction or outright elimination.
One of the taxes is the Merchant’s Capital Tax, which is not levied in York County. The county does, however, depend on two of those taxes being targeted — the Business Professional Occupation Licensing tax and the Machinery and Tool tax — in order to generate millions of dollars in revenue each year. For example, the county generated $5.79 million in BPOL tax revenue and $362,969 in M&T tax revenue in 2012. With a $130.1 million budget for the county passed in May, a loss of more than $6 million in revenue would prove harmful.
Both campaigns said their proposals are revenue neutral.
A spokesperson for Republican candidate Ken Cuccinelli’s campaign said a pair of commissions comprised of legislators from the General Assembly and local government members are busy working on a report that would identify specific tax loopholes and exemptions that could be closed, generating revenue that could be sent to the localities in Virginia affected by the loss of revenue.
Reducing or eliminating those taxes would be a boon for businesses throughout the state, according to the campaign for Cuccinelli, the state’s current attorney general. The reduction or elimination of BPOL and M&T taxes would be contingent upon there being a mechanism in place to ensure localities don’t lose revenue. No specific exemptions or loopholes will be identified until the commissions finish their work, which is expected to happen in early November.
Rachel Thomas, a spokesperson for Terry McAuliffe’s campaign, said that upon the beginning of McAuliffe’s term, a task force would be commissioned to investigate ways to remove the BPOL and M&T taxes without disturbing the revenue of localities in the state.
“The alternative sources of revenue would be determined by the Task Force,” Thomas said. “Localities would be able to choose if they wanted to use those alternatives. But this is also why Terry would make any changes optional. Localities would not be forced to make any changes unless they wanted to and had revenue neutral alternatives they preferred.”
The focus on eliminating BPOL and M&T taxes remains hypothetical. Because neither campaign has yet identified any tangible loopholes, exemptions or alternative sources of revenue, The York County Board of Supervisors, which is tasked with approving the county’s budget, has little tangible information with which to work.
“When people mess with these things, they sound like a great idea, but don’t make it pie in the sky with how you’re going to replace this,” said York County Supervisor Thomas Shepperd. “They’re going to have to identify some revenue sources here or give us some way of making up the money.”
The M&T tax and especially the BPOL tax produce significant money for the county. Since 2008, BPOL has generated $30.5 million for York County, while M&T has resulted in $16.75 million. Recent years have seen revenues declining while costs — especially for healthcare — continue to climb. The M&T rate took a major hit when the Yorktown Refinery closed in 2010, causing the revenue the county generated from that facility to decline by more than $3 million in recent years.
The county has also had to contend with changes to revenue streams for the York County School Division, with state contributions to the schools declining by more than $10 million in recent years while healthcare costs have surged by $4.7 million in the last two years. For a county with an operating budget that in recent years has hovered in the $120 million to $130 million range, those types of losses and new expenses have caused the supervisors to look elsewhere — mostly in the real-estate tax rate — for revenue.
Counties in Virginia are limited in the manners by which they can generate revenue. York generates the majority of its revenue from property taxes, including real-estate taxes, where it is estimated to collect more than $85 million in 2013. During the last budgeting process, the Board of Supervisors agreed to raise the real-estate tax rate by 1 cent to 75.15 cents per $100 of assessed value. That move came on the heels of the previous budget process, which saw the supervisors raise the rate by 8.4 cents.
A county spokesperson said county staff and the supervisors would “need to determine and evaluate all options that might be available at that time” in the event that the revenue from BPOL and M&T taxes were lost. The spokesperson also said “it would be premature to speculate as to whether the real-estate tax would be the only option available and what the magnitude of the impact might be.”
