THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, December 16, 1994 TAG: 9412150198
SECTION: CHESAPEAKE CLIPPER PAGE: 06 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 55 lines
When they pinch pennies in Richmond, you can hear them squeal in places like Chesapeake.
Gov. Allen's tax break to businesses, part of his proposed $2.1 billion tax cut, threatens to create problems for city government that would extend well beyond the governor's term of office.
He wants to strip localities of some of their authority to tax business receipts, depriving them of hundreds of millions of dollars they need to build schools, roads and provide essential public services for their residents.
The numbers are not in on exactly how much revenue Chesapeake would lose if the plan is implemented, but it would be substantial - the equivalent of several cents on the city's property tax rate. The best estimates on the cost to most localities is between 3 and 5 percent of total revenue.
Some of this loss might be recovered through cost-cutting measures, as Gov. Allen intends, and a planned five-year subsidy to localities would further ease the burden. But it's not realistic to expect that Virginia's cities and counties can simply shake off the effects of such a substantial loss of revenue. Cuts in services and/or local tax increases will be the inevitable result.
The governor's proposal is not so much a tax cut as it is a tax shift. It amounts to yet another in a long series of unfunded mandates passed down to the localities from Richmond.
Chesapeake has planned its future with the expectation that existing revenue sources, including projected growth in taxable business receipts, would be available to pay the way. Chesapeake residents were told, for example, that the road bond referendum approved by the voters this fall would not necessitate a tax increase, partly because of expected increases in revenue from economic development. Repealing the tax on business receipts would deprive the city of much of the benefit from the anticipated growth.
If the General Assembly goes along with the tax-cut proposal, they must know that it will undermine even further the ability of localities like Chesapeake to control their own destiny. Long after the political benefits have subsided, cities and counties will still be struggling to pay their bills, and the money will have to come from somewhere. If not from taxes on business revenues, then from other taxes from other sources.
Gov. Allen has decried attempts by the federal government to pass its problems down to the state. It's inconsistent of him now to advocate a plan that is essentially meddling in local tax matters by the state.
Everyone appreciates tax cuts, and we hope the governor can deliver the cuts he has promised. But to do it at the expense of Chesapeake and other local governments is simply not economically responsible. by CNB