A funny thing happened Friday afternoon on the way to some much needed tax relief for small and family-run businesses: HB 1437, patroned by Delegate Mark Cole (R-88, Spottsylvania), which would grant localities the power to keep or discontinue the dreaded BPOL Tax, was recommitted to the Senate Finance Committee from the Senate floor even though that committee earlier in the week passed in unanimously!
Here's what happened: Early last week the bill passed out of the Finance Committee unanimously and went to the full Senate in the "uncontested bloc." That’s where bills without dissenting committee votes go and almost always are passed, without controversy, in a group. However, on the bloc's "third read" Friday — the vote which would've sent HB 1437 to Governor Bob McDonnell — Senator Charles Colgan (D-29, Manassas), who chairs the Finance Committee, pulled it out of the bloc and his motion to "recommit" the bill to his committee did not meet opposition.
We're not sure why this bill was sent back to the Finance Committee, where no interest groups spoke in opposition it. It passed the House 94-5, but we've seen in the past that big, bipartisan margins in the House mean nothing in the Senate.
The BPOL Tax was established to fund the War of 1812. Not only has it outlived that purpose by 199 years, it is inherently unfair, taxing Virginia businesses on gross receipts rather than profit. That means companies that lose money still pay a tax! It punishes many small, family-run businesses that run on tight profit margins. In this down economy, government should do all it can to encourage job growth. The BPOL Tax kills jobs and stunts the growth of small businesses — which create 75 percent of all jobs in America.
This bill is entirely permissive. Localities, as unfair as it is, may still keep the BPOL tax if this bill becomes law. However, it allows them to tax businesses at the Virginia Taxable Income rate instead, which is entirely fair. Plus, this bill would return more decision-making authority to government closest to the people. Denying localities the option to end this tax after 199 years is indefensible. This option would give localities an edge in attracting new businesses and encourage the start up of new locally-owned businesses as well.
State government should do all it can to help businesses thrive. Instead, we hear stories all the time, such as the small business owner in Norfolk who lost $70,000 last year, covered the loss with his savings, and still had to pay $4,000 in the BPOL Tax! Is that how we create jobs in Virginia?