Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 9, 1995 TAG: 9501120044
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE: FRANK LONGAKER
DATELINE: LENGTH: Medium
But Gov. George Allen's recent call to eliminate the right of localities to collect the Business and Professional Occupational License tax is the wrong pick.
A little background: The Business and Professional Occupational License, or BPOL (pronounced BEE-pole) as it's popularly called, is an annual tax based on the individual firm's gross receipts from the previous year. The state gives each locality the right to assess the BPOL and, in most communities, it has become part of the mix of money available, along with property and real-estate taxes, sales taxes, utility taxes, machinery and tool taxes, and other revenues.
Most cities and towns and about half the counties in Virginia levy the tax. In most localities, it is a significant part of the operating budget.
At the request of a few big businesses, some chambers of commerce and a couple of Northern Virginia governments, the governor has said he will push to phase out the BPOL over the next five years.
The anti-BPOL logic goes like this:
The tax is unfair because it is assessed on gross receipts of the individual business, not the company's net profit. The tax is not consistently applied in each locality since some areas use it and some don't. Its use supposedly discourages businesses from locating in the state. And, finally, local governments need to be more efficient by tightening their belts ... and this is the two-by-four the state can use to enforce that philosophy.
None of these arguments hold up under scrutiny.
Yes, the tax is calculated on gross receipts. This is as it should be. Successful, well-managed businesses should not have their net profits reduced through this tax so that they can subsidize poorly performing companies.
If a business is eligible for routine services provided by the community, it should share the bills, regardless of the firm's net profits. After all, when police discover an open window or door in the middle of the night at a business, they don't stop to see if that business made a net profit and paid its tax before they protect it.
Some businesses complain that the BPOL is administered with little consistency from area to area. The flexibility of the locality in its assessment of the tax and the rate of assessment is one of the advantages of the BPOL.
While Bedford, Franklin and Pulaski do not assess the tax, Roanoke, Salem and other localities do. That's great. It means that businesses interested in a Virginia location can pick or choose between non-BPOL or BPOL sites, an option that's certainly not a deterrent to any serious corporation. Besides, companies look at overall tax rates in their decision-making process.
Let's let the individual communities decide whether they wish to use the BPOL revenues to help fund their economic development efforts or choose instead to sell the lack of BPOL to attract new business. There is no need to have everyone fit into the same mold. The local community leaders know best how to promote their area, not some pointy-headed bureaucrat in Richmond.
Much is made of the fact that big Northern Virginia governments like Arlington are pushing the governor to eliminate BPOL. They say they can forgo the revenue if it's eliminated statewide. Well, why don't they just drop it in their area? (Methinks me smells a rat.)
Of course, they can skip the BPOL revenue. With the high-priced real estate in their areas, it's easy to recover the money by raising property-tax rates a few cents on all those fancy houses - a move that won't cost those homeowners much since they can deduct it from their income tax anyway.
Raising the real-estate tax rate around here, on the other hand, where personal income levels are far lower, would really hurt, as would raising other regressive taxes such as the sales tax. And to recover the revenue lost, the real-estate tax rates here would have to be jacked up to a much higher level on our local, less-inflated property values.
OK, OK. But what about local governments slimming down and tightening their belts? Does it follow that if the state takes away this money, the localities will have to be leaner?
Maybe. Maybe not. That's for the citizens of each area to decide. We can tell our elected officials what and how to cut. We don't need others to mandate to our local governments. If they can slim down and become more efficient, let them decide to reduce - or cut - BPOL. But leave our local governments with options - perhaps reducing taxes on the homeowner. Or spending the savings on better services. Or, even, on better schools. In other words, let us dictate our own future.
In a nutshell: Governor, leave the BPOL alone.
Frank Longaker is president of National Business College in Roanoke.
by CNB