BALLSTON-VIRGINIA SQUARE

Civic Association Newsletter

October/November 1996 - Volume 20, No. 2



LOCAL INCOME TAX BACKGROUND

The local income issue was originally included in the BVSCA 1995 survey based on a September 1995 work session involving the Arlington County Board and the Economic Development Commission on the County's new Economic Development Plan and other recent developments. Near the end of the meeting, Chairman Eisenberg, 1995 Arlington County Board, indicated that sometime in the future there needs to be a discussion of an income based tax, along with a wealth based tax. Also, we reported that in the discussion about a possible local income tax at the BVSCA Candidates night of September 26, 1995, Tim Wise of the Courtlands Civic Association, and Vice-President of the Arlington County Taxpayers Association (ACTA) at that time, had inquired of Chairman Eisenberg how much longer the County should continue being supported by a wealth based tax, property tax, and whether there needs to be a start toward an income based tax.

Mr. Eisenberg responded "I think you took my statement a little bit farther than in fact it went. The fact is that we do have pretty much a wealth based tax system. Comes from what you own, property whether its personal property or real estate. It basically comes from that source, predominately, not entirely, in terms of local financing and we don't have the authority to do anything else. But it is an archaic way of taxing. I think there is a healthy debate that could be entered into. George Allen started that debate to some degree but I think he headed off in the wrong direction. But it's always helpful to examine your tax authorities and see which ones works best. The BPOL Tax for example, is a terrible tax. People hate it. It's burdensome, it's regressive. The problem is it also provides 10% of our general revenue fund and we have to figure out an alternative and we have very little taxing opportunities compared to cities."

In the December 1995 Newsletter, the Association reported that existing law ("Code of Virginia Section 58.1-540, Levy of the tax."), authorizes Arlington to implement a local income tax if the County holds a referendum to approve the tax. This authority to levy a local income tax was adopted by Virginia in 1989 in Section 58.1-540, Subsection A. Specifically, this subsection authorized Virginia counties having a population of more than 500,000, and any county adjacent thereto [Arlington], and any city contiguous to such an adjacent county or city, or any city with a population of at least 265,000 is hereby authorized to levy a local income tax at any increment of one-quarter percent up to a maximum rate of one percent upon the Virginia taxable income as determined in Section 58.1-322 for an individual, Section 58.1-361 for a fiduciary of an estate or trust, or Section 58.1-402 for a corporation, for each taxable year of every resident of such county or city or corporation having income from sources within such county or city, subject to the limitations of subsection B of this section. The same rate shall apply to individuals, fiduciaries and corporations.

Subsection B states The authority to levy a local income tax as provided in subsection A may be exercised by a county or city governing body only if approved in a referendum within the county or city...If the voters by a majority vote approve the authority of the local governing body to levy a local income tax, the tax may be imposed by the adoption of an ordinance by the governing body of the county or city in accordance with general or special law, and the tax may be thereafter enacted, modified or repealed as any other tax the governing body is empowered to levy subject only to the limitations herein. No ordinance levying a local income tax shall be repealed unless and until all debts or other obligations of the county or city to which such revenues are pledged or otherwise committed have been paid or provision made for payment.

In the January/February 1996 Newsletter, the Association reported that at the Arlington County Civic Federation Meeting, January 2, 1996, Chairman Hunter said "...A question that you all asked, I was talking to Mr. McGeary [Scott McGeary, former President, Arlington County Civic Federation] just before the meeting. The way I read the question was interesting. It said, let me see if I can get the right words here, respectfully request [your] comments on the following topics thought to be of primary interest to the Federation. It says Exploration of the Feasibility of Arlington's Implementation of Local Income Tax Authority from the General Assembly. Now the way I read that sentence, I told Mr. McGeary, it sounded to me that as though the Civic Federation was endorsing the concept of local income tax. I checked with my colleagues and I was unable to find anyone who was interested in having local income tax authority in Arlington. But I did a little more checking, I found out and some of you know that we do have income tax authority upon referendum. And that authority, I know Mr. McGeary already did know this, is for transportation use only and if it were to be approved by the voters, if it were to put on the ballot by the County Board which it will not be. If it were to be approved by the voters then it would expire after 5 years at the so called sunset provision. I could go into more detail in it, if there's more interest in it. If I haven't made it clear that this County Board at least is not interested in imposing or even putting up for referendum the question of local income tax authority. Then we will discuss it during the questions."

Also, the January/February 1996 Newsletter reported that the Volunteers for an Independent Arlington (VIA) Coalition included a recommendation to repeal Virginia jurisdictions' authority to impose a local income tax, in their presentation at the Northern Virginia Delegates Meeting, dated January 6, 1996, Government Center, Fairfax County, Virginia. The VIA Coalition added there may be, however, some senators or delegates from Fairfax County, who support a local income tax. If that is the case, the VIA Coalition voiced support of the Arlington County Board in its opposition to a local income tax and urged the 1996 General Assembly to remove the "counties adjacent thereto" language from the current law so that this unwanted piece of law does not hang over Arlington County. The VIA Coalition also formally expressed their opposition to any efforts on the part of the legislature to do what the 1991 General Assembly did in authorizing the "meals tax" for local jurisdictions, subject to voter approval by public referendum. In that case, the legislature approved a floor amendment to authorize Arlington to implement the "meals tax" without a public referendum, if the Arlington County Board voted unanimously to adopt such a tax, which they did, and held one public hearing.

Since that time the Executive Committee has learned that Delegate Mitchell Van Yahres (D), House District 57, Charlottesville, Virginia, patroned House Bill (HB) 1410, 1996 General Assembly, to eliminate the five-year expiration of authority to levy the tax. This bill allows all counties and cities of the Commonwealth to impose a local income tax at the rate of one percent in addition to the applicable state income tax rate with a reduction in the local real estate tax rate to offset the amount of local income tax revenues collected in the first full fiscal year in which the tax is levied. Also, the full text of HB 1410, presented and ordered printed 963172480, Jan. 22, 1996, shows that this is a bill to amend and reenact Sections 58.1-540 and 58.1-548 of the Code of Virginia and to repeal Section 58.1-549 of the Code of Virginia, relating to local income taxes. The full text of the bill shows that all reference to the referendum and voter approval requirement has been crossed out, and the limiting language that the income tax be used for transportation purposes also has been crossed out. The bill states that the tax may be imposed by the adoption of an ordinance by the governing body of the county or city.... It should be noted that HB 1410 was continued to 1997 in Finance (22-Y 0-N), including a "yea" vote by Arlington County Delegate Jim Almand (D).



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