ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, February 7, 1996 TAG: 9602070049
SECTION: VIRGINIA PAGE: B-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: MARGARET EDDS STAFF WRITER
A decades-long push to grant tax relief to small-business owners appears to be approaching fruition in this year's General Assembly, but uncertainty remains about who'll pay for the cut.
Among the options: small-business owners.
That wrinkle was among the points of contention Tuesday as business interests and local government officials squared off over how best to change the state's business, professional and occupational license tax, known as BPOL (pronounced "bee-poll").
After years of debate and a shelf-full of legislative studies, the assembly appears poised to establish an income threshold freeing smaller businesses from paying the controversial tax on gross receipts.
But uncertainty remains over how cities, counties and towns would make up the income loss - by raising their real estate tax rates, by creating a $50 business license fee, or by reducting local spending.
BPOL legislation moving through the assembly allows local governments to replace lost taxes with a $50 license fee. A problem with that, critics say, is that two groups of business owners may wind up paying more, not less.
For instance, large businesses may be asked to pay the current rate, plus the $50 fee. And owners of some very small businesses with less than $30,000 in annual gross receipts already pay less than the proposed $50 fee.
"It's ironic that in the name of tax relief, we might wind up imposing another fee," said Betty Long, director of fiscal policy for the Virginia Municipal League.
Bills introduced in both the House and Senate call for exempting business owners with annual gross receipts of less than $100,000 from the tax. Local government officials, who argue that it would be difficult to make up that revenue loss, are pushing to lower that threshold to $50,000.
"It's time to do something for ... small businesses, the mom-and-pop store, the company with a handful of employees, the smaller service-oriented company, the fledgling technology firm," said Lt. Gov. Don Beyer, who endorses the higher threshold and spoke on its behalf at a public hearing Tuesday.
"A lot of small towns and counties will be greatly hurt by the threshold," countered Flippo Hicks, lobbyist for the Virginia Association of Counties, which favors the lower limit. The group argues that the bulk of businesses now paying the tax in smaller localities falls below the $100,000 limit.
BPOL has long been a source of contention in the business community. Critics argue that the tax - which applies to all receipts, not just profits - drives out businesses, particularly small companies. Northern Virginians say the tax makes it difficult to compete in attracting businesses with Maryland, which has no such tax.
The problem with eliminating or reducing BPOL, local government officials counter, is that it puts $300million annually in local coffers. BPOL is one of the few taxes local governments can set without legislative approval.
The impact on Western Virginia localities that levy the tax would vary widely.
Roanoke, which collected $7.8 million in fiscal 1994, would lose $338,025 in revenue under the proposal before the legislature.
By contrast, Pearisburg took in $97,192 and would lose $4,200, according to a survey by the Virginia Municipal League.
Without the tax, municipal league and county association members say, governments would have two options: Cut spending or raise another tax.
When New Jersey cut a similar tax a few years ago, local real estate taxes skyrocketed.
The municipal league also opposes two other features of the proposed change in BPOL: exempting those who design or sell computer software from it, and setting up an appeals process that would apply to other business taxes as well as BPOL.
LENGTH: Medium: 73 lines KEYWORDS: GENERAL ASSEMBLY 1996by CNB