Virginia Increases Taxes on ‘Business’
Republicans in Virginia’s House of Delegates endorsed a plan Monday to end tax breaks for many businesses, joining Gov. Mark R. Warner (D) and the Senate’s Republican leaders in calling for new revenue to balance the state’s budget.
Faced with the prospect of closing Virginia’s $1 billion budget gap with deep cuts to popular programs, the GOP-controlled House instead voted 59 to 36 to raise $520 million by eliminating sales tax exemptions enjoyed by utility companies, the shipping industry, airlines, dry cleaners, telephone companies and other businesses. House leaders expect the bill to receive final approval Tuesday.
The plan, first put forth by Republican leaders just 80 hours before the vote, turned the Capitol’s tax debate on its head. Business lobbyists, Democratic legislators and Warner administration officials gathered for their own tense, closed-door strategy sessions and wondered what to make of a GOP plan that targets the party’s traditional business allies.
Since when are sales taxes a tax on business? Sales taxes are passed on directly and openly to consumers. Of course, all taxes on businesses are actually passed on to their customers in the form of increased prices.
The only sense in which making dry cleaners collect sales taxes affects the dry cleaners is that it raises the effective cost of their product and, to the extent that demand is elastic, costs them customers. Someone who is willing to pay $5 a week to have their shirts cleaned and pressed might not be willing to pay $5.40 and thus decide to do their own. Or they might decide to have their suits cleaned every fifth time they’re worn rather than every fourth time.