Bacon's Rebellion

Democracy Thrives in Sunlight

Virginia Rates a B+ for Tax Administration

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by

James A. Bacon
in ,

tax_appeal

There is broad agreement that tax rates are an important factor influencing a state’s business climate. Less widely recognized is the importance of how taxes are administered. Apparently, there is as much variation in tax administration as there is in tax rates.

The transparency and even-handedness of tax administration is an attribute that Virginia can use to its advantage. Contrary to the Bolshevik wing of the Bacon’s Rebellion commentariat, which portrays Virginia as a bourbon-swilling, seersucker-wearing, pro-business oligarchy, the Old Dominion ranks 26th in the nation for its business tax climate, according to the Tax Foundation 2014 survey — hardly a capitalist paradise. (Such a dismal ranking may go a long way towards explaining Virginia’s equally mediocre economic performance.)

But Virginia gets a better grade for tax administration. According to the Council on State Taxation (COST), Maine and Ohio each garner an A rating for their tax appeals and procedural requirements, while five other states can claim an A-. Virginia is included among the eight states that score B+, putting it way ahead of the likes of California and Louisiana, which scraped bottom with D- scores. The rating puts the Old Dominion in the top third. Not great, but not shabby.

Among the key elements that COST looks for are an independent appeals forum, minimal bond-posting requirements during appeal, even-handed statutes of limitations, reasonable due dates for filing income tax returns, adequate time to file protests, clearly defined procedures and administrative transparency. Virginia scored well in all categories but one — the lack of an independent dispute forum. In Virginia the tax commissioner makes the final determination in administrative appeal.

It’s pretty turgid stuff — even accountants might nod off just thinking reading about it. But setting up an independent forum might bolster Virginia’s perception of even-handedness, which could offset its less-than-stellar reputation for business taxation. I wonder if anyone in the General Assembly has ever considered it.

— JAB

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4 responses to “Virginia Rates a B+ for Tax Administration”

  1. TMT Avatar
    TMT

    Virginia has succeeded because of its closeness to Uncle Sam’s “all you can eat buffet,” the great harbor at Hampton Roads, and relative sanity compared to Maryland and the District. It’s still a “good old” boy state. The CTB for example.

    Also, the fact that the best colleges are not in the Metro D.C., HR, or Richmond areas hurt to. DJR is right about this.

  2. Breckinridge Avatar
    Breckinridge

    Pull a ten year old report and I think you’ll find Virginia has slipped down from an A. And I hate to correct you, but many Tax Commissioner decisions can be appealed to the courts — but they are not tax courts specifically and generally the level of expertise in the judges is marginal. COST and others would like a specific tax court. Taking a matter to Circuit Court or the Supreme Court of Virginia is an expensive and dicey proposition, so in effect the Tax Commissioner isn’t challenged very often. The Tax Commissioner is not an independent arbiter, although many of them have been eminently fair.

    The other problem Virginia has is the complexity created by all the localities with their own commissioners of the revenue and their own ordinances and idiosyncrasies. But that is mitigated, thankfully, by our old friend the Dillon Rule. Unlike the state Tax Commissioner, some of the local tax administrators are outrageously biased and unfair.

  3. Peter Galuszka Avatar
    Peter Galuszka

    TMT is right here. Once again, we fail to admit Virginia’s dependency on the federal dollar, despite how hard conservatives try.

    All Power to the Soviets! Smash Capitalist Roaders! Free Khodorkovsky and Pussy Riot today!

    The Central Committee AGITPROP

    1. TMT Avatar
      TMT

      I think we also attract the type of worker who is good at serving government needs/desires, whether as a fed or a fed contractor. Steve Case and Ted Leonis are about the only big-time entrepreneurs that come to mind. And AOL is about as relevant as the old Commodore Computer.

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