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Martinsville Bulletin, Inc.
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Martinsville, Virginia 24115
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Possible repeal of two taxes worries local officials

Tuesday, October 1, 2013

By DEBBIE HALL - Bulletin Staff Writer

Real estate tax rates in Henry County could jump if the state eliminates two taxes and does not replace the revenue they generate, officials have said.

The Business, Professional and Occupational License (BPOL) and Machinery and Tools (M&T) taxes are among the limited ways the county can generate revenue, County Administrator Tim Hall said. However, “there has been a legislative push the last few years to do away those taxes,” he said.

Virginia’s three gubernatorial candidates also have included proposals to eliminate or reduce the BPOL and M&T taxes in their preliminary tax plans. Doing so, they contend, would encourage businesses to locate in Virginia.

Legislators have discussed making the elimination revenue neutral, which means localities somehow will receive the same amount of revenue, Hall said.

“But no locality has seen how” that would be accomplished yet, and that “makes us nervous,” Hall said.

If the state cuts the two taxes and does not replace the estimated $5.6 million shortfall, real estate owners would feel the biggest pinch.

Currently, the county raises $1.5 to $1.6 million per year from the BPOL tax, according to Darrell Jones, the county’s finance officer.

“If that went away, the real estate rates would probably go up about 6 cents, from 48.8 cents to about 55 cents per $100 of assessed value,” to make up for the lost revenue, Jones said.

That means taxes on homes with an assessed value of $100,000 would rise from the current $488 to $550, but the elimination of the “machinery and tools tax would be even more devastating,” Jones said.

The Machinery & Tools tax “is a totally different tax than the BPOL. It is basically a personal property tax that industries pay on their machines and equipment (used) to manufacture their products,” Jones said.

Currently, the machinery and tools tax is $1.48 per $100 of assessed value — the same amount as on vehicles — generates about $4 million for the county, he said.

If that revenue was lost, another 14 to 15 cents per $100 of assessed value may be tacked on to the real estate tax “to try and recoup the loss of $4 million,” Jones said.

Using the highest estimated rates, the additional real estate tax levy taxes on a $100,000 home could increase from the 55 cents per hundred (with the BPOL tax added on) to 70 cents per hundred of assessed value, or $700 for a home with an assessed value of $100,000.

If localities lose the BPOL and the M&T taxes, it “would definitely be devastating,” Jones said. “The argument that eliminating these taxes would lead to more businesses locating here sounds like a dream to me. I don’t think companies make decisions on whether they come here based on the fee structure now,” he said.

If the taxes are eliminated and the revenue is not replaced by the state, “businesses would have to pay a bigger real estate tax, but most of their investment is in their equipment and machinery,” Jones said. A hike in the real estate rate “would be a bigger bite for residents to have to pay and hurt residents worse than companies, because companies would save substantially by not having to pay that Machinery and Tools tax,” he said.

According to online information, BPOL taxes are imposed in some form in all 39 cities and 46 of the 95 counties in Virginia, inlcuding Martinsville and Henry County.

Recently, Martinsville City Council passed a resolution opposing elimination of the taxes. Hall said he anticipates the Henry County Board of Supervisors will consider the matter when crafting its legislative package in November.

Right now, the proposals to eliminate the taxes and make them revenue neutral to localities “are fairly vague,” Hall said. “If you believe in magic and anticipate this will be a revenue neutral move, or that the state would give us the authority to raise the revenue in another way or give us that revenue straight out, I don’t think there would even be an issue.”

At this point, “no one given us any details, and I would say that makes us leery,” Hall said. “The state likes to tell localities how to run their business. It is disconcerting to us” for those taxes to be eliminated “without some assurance” the revenues would be replaced.

 

 
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