ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, February 24, 1997 TAG: 9702240098
SECTION: EDITORIAL PAGE: A-6 EDITION: METRO
SERIES: Second in a series
MEET THE Smiths of Roanoke. A family of four, they buy $200 worth of groceries a week, for which they pay $9 in sales tax. Though they probably don't keep track of it, that adds up to $468 of taxes in a year.
Now, we don't know how much money the Smiths have to spend in the first place. But the state of Virginia says that doesn't matter. Whether the Smiths make $25,000 or $100,000 a year, they'll pay the same amount in food taxes.
Which means, of course, the tax takes a greater portion of the income of a $25,000-a-year family than of a $100,000-a-year family. That's why it is called regressive: It zings the poor harder than the rich.
What's more, this tax is likely to become more regressive as federal welfare reform imposes new limits on food stamps. Where a family of four with no more than $20,288 in income now qualifies for food stamps to help with grocery bills, that help may not be available much longer.
Will this prospect lend impetus to food-tax repeal? Perhaps. In any event, state leaders should repeal sales taxes on food because it's unfair to penalize low-income citizens for buying a basic necessity of life.
The politicians, mind, aren't claiming the 4.5 percent food tax (3.5 percent state; 1 percent local) is fair. Opposition to repeal centers on how to make up the revenue loss - and understandably so. The amount isn't peanuts: about $450 million a year for the state's general fund; $75 million a year for the state's transportation fund; $155 million a year for localities.
Even so, 27 states manage to exempt food from their tax base; others are considering it. And still others offset food taxes paid by lowest-income families with income-tax credits or refunds. Virginia should offer an earned-income tax credit in any case.
If the state did exempt food, the revenue loss could be recouped in ways that would make Virginia's tax structure fairer still.
You could extend the sales tax to various services not now taxed - many of which attract big spending by wealthier residents, but not the poor, so that exempting these services amounts to a tax break for the rich. (This unfairness grows as a goods-based economy shifts to a service-based economy.) You could raise the sales tax for all other items now taxed - none are as essential as food. You could raise the top rates of the state income tax to make it more progressive.
This year, legislators considered increasing the sales tax as a means to phase out localities' personal-property taxes. But that proposal, still under study, would further penalize the poor with higher food taxes while giving another tax break to better-off citizens. The personal-property tax, however much it's hated, is progressive: The more expensive your car or boat, the higher your tax. And personal-property taxes can be offset via deductions from state and federal income tax liability; sales taxes can't be.
This newspaper favors big increases in consumption taxes for tobacco and gasoline. Such increases would have an admittedly regressive effect. But this is all the more reason for improving fairness in the overall structure, and for finding ways to give working-poor Virginians a tax break.
LENGTH: Medium: 59 lines KEYWORDS: GENERAL ASSEMBLY 1997by CNB