CHRISTIANSBURG — Montgomery County will eliminate its merchants’ capital tax on Jan. 1, a plan that will end a revenue stream that has existed for nearly a century.
The County Board of Supervisors, in a 4-3 split vote along partisan lines, approved the measure on Tuesday evening following several public debates on the issue since August and after hearing from many employers who criticized certain points. of the tax.
The issue that ultimately led to this historically significant decision split the board along partisan lines due to a number of concerns about certain aspects of the tax and the potential impact of its elimination.
The four Republicans on the board have expressed concerns about issues such as the fairness of the tax due, in part, to the fact that only a handful of employers in the county provide a significant portion of its revenue. They also lamented that some small businesses may end up paying more than some national brands in the region.
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Another point that was raised: the tax is effectively voluntary because the county does not have the means to fully enforce its payment. This has raised concerns that some companies are not paying their fair share.
Additionally, some supervisors have expressed fears about the tax, which is causing employers considering moving to the county to hesitate — and similar worries about existing businesses looking to move elsewhere because of the tax.
“What if a company leaves Montgomery County? It is a consideration. That’s hundreds of jobs lost,” said Republican Oversight Council Chair Sherri Blevins, who added that the tax’s abolition was long overdue.
The tax scheduled to be eliminated is imposed on business capital, which is defined as on-hand inventory, daily rental passenger vehicles as defined by a section of the Virginia code, rental property daily and all other personal property – except personal property which is not for sale as merchandise and is taxed in another category, according to a description provided on yesmontgomeryva.org.
The tax is assessed at 20% of the purchase price of an item and the rate is $3.05 per $100 of assessed value. This means, for example, that the first-year tax due on traders’ capital-in-hand purchased for $100 would be 61 cents, according to yesmontgomeryva.org.
Montgomery County’s top five tax payers are backcountry.com, Shelor Motor Mile Group, Duncan Automotive Network, Walmart and Lowe’s. They are paying about $805,000 in total, according to figures recently provided by the county.
Backcountry.com, Shelor and Duncan each pay $337,103, $265,338 and $134,692 respectively, and they are by far the biggest contributors to the top five. Walmart and Lowe’s pay $34,992 and $32,678, respectively.
A representative from backcountry.com and the owners of Shelor and Duncan have each appeared before supervisors more than once to denounce the tax. They were also joined by other local employers, some of whom said the issue had caused even more concern in recent years due to increased internet sales and the fact that there are businesses that have actually have some presence in the county but don’t. t pay the tax.
David Hagan, the owner of Shelor Motor Mile, spoke about the tax being voluntary
“This tax is not equal and is not distributed fairly across all areas,” he said on Tuesday. “Enough is enough. It’s only gotten worse with online merchants, and they don’t pay any of these taxes.
Hagan said he also disagrees with those who have characterized him as being against schools, which receive county funding.
“It’s a ridiculous thought,” he said, adding that his company has donated millions of dollars to schools over the years.
Despite concerns about its fairness, scrapping the tax had been strongly pushed back by the three Democrats on the board due to their own concerns about eliminating a revenue stream of about $1.5 million. of dollars, which some say could come in handy at times, especially for a county that has seen steady growth over the years and, therefore, an increased need for municipal services.
The three Democrats on Tuesday expressed more favor for a plan that would have delayed the decision to abolish the tax and given the county more time to figure out how to make up for lost revenue.
Despite overwhelming boardroom support for ending the tax, Supervisor April DeMotts, a Democrat, said about 80% of residents in her district who provided comments on the topic were opposed. to abolition.
DeMotts also took aim at the argument that the tax was voluntary.
“It’s an enforceable tax,” she said. People who don’t pay are “choosing to break the law. It’s not an honor system.
Another point DeMotts raised was about the supervisors’ continued request to the General Assembly to help them increase their ability to generate more local revenue. She said it made little sense to cut out one source of revenue while regularly asking Richmond state lawmakers to allow them to pursue other funding options.
“Are we fiscally responsible by removing this tax…and not identifying the expenses that will be reduced? said Supervisor Sara Bohn, another Democrat.
Bohn said schools were a concern and called for future cuts to occur specifically in the county’s share of the budget. Bohn, who referred to the county’s local funding structure, said he was concerned the measure would see schools lose $10 million over the next decade.
Bohn said she would have been receptive to a tax relief provision for businesses. But for complete abolition, she said she would vote no.
In response to concerns about how to make up for lost funding, some Republicans pointed to the county’s continued growth, which they say has led to a natural increase in revenue.
“I don’t think the companies paying the lion’s share of it would appreciate it if we just reduced [their] bill in half,” said Supervisor Steve Fijalkowski, a Republican. “I think the money will be recovered. I don’t understand why everyone is rushing to “we will have to increase our property tax to compensate for this”. I do not think so. We are growing. We are a growing county.
A few of the Republicans pointed to encouraging revenue numbers, with Blevins saying the county’s average growth was just over $2 million in typical years.
Blevins, who unsuccessfully lobbied for a reduction in the property tax rate earlier this year, said she sees measuring merchant capital as a kind of incentive to retain and attract more businesses in the count. She noted the unpopularity of the tax among employers and how it was seen as a deterrent.
“These companies have been talking about this for over 25 years. They’ve waited long enough,” Blevins said.
A person who addressed the board on Tuesday called on those who support eliminating the tax to stand up. Most of the more than 30 people present stood up.
However, a few speakers opposed ending the tax.
One such speaker, Chris Waltz, challenged some of the justifications for removing the tax, saying some supervisors turned into “pretzels” trying to provide reasons.
Waltz also disputed the argument that the tax was voluntary. He said multiple county mandates may actually be voluntary.
It’s “no more voluntary than other things, like doing things in your house and not telling the county so your taxes don’t go up,” he said.
Waltz clarified that he was not against companies receiving relief, but he said what a slight majority of the council was calling for was not a good idea.
“They [businesses] need relief,” he said, “but they don’t need to get away with it because they’re using the same fire, the same police [services]. They use the same routes.
Setting the elimination for Jan. 1 means the county won’t need to adjust its current budget, officials said. The date also allows the impact of the decision to be factored into the next year’s budget and is intended to give staff more time to prepare options to offset the reduction.