Category Archives: Business and Economy

Complex Digital Sales Tax Worthy of Veto

By Steve Haner

Pick any member of the General Assembly at random, stop them in the grocery store for a chat, and quiz them about the digital sales tax they approved a week ago Saturday.  It will quickly become clear that most had no idea what they were voting for when they approved it.

What will the tax add to the cost of your Amazon Prime or Netflix? (For most, 6-7%.) Will the tax be collected on both the monthly fee and on anything extra you download (Yes) Will it add to the cost of preparing your tax to file online, your annual lease for Microsoft programs on your laptop or your security system program? (Yes, most digitally-based services will all be taxable to individuals, and many of them will be taxable to businesses. If you are doing something on a computer or phone that costs money, it is likely to become taxable.) 

Even for a business, if some software package its employees use includes a combination of online services, will it owe tax on the entire package? (Yes, unless the vendor is willing to break apart the bill, which many may refuse to do. That is because of the new language about taxing bundled services.)  If an out of state vendor does not add tax to the invoice, taxpayers will be required to calculate and pay it as a use tax, with auditors ready to pounce if they don’t.   

Think of engineering, law, banking, or medicine.  So many of their processes are now controlled by expensive software, most of which is about to be 6-7% more expensive.  At the shipyard in Newport News, paper blueprints and printed job instructions were replaced with tablets and digital design programs years ago.   Continue reading

Jefferson Institute Lists Bills Youngkin Should Veto

By Derrick Max

We have reached sine die of the 2024 General Assembly legislative session. During this session, over a thousand individual bills and a nearly 500-page biennial budget were sent to the Governor. All of this must be reviewed and acted upon by Governor Glenn Youngkin (R) before the April 17 reconvened session.

There may be hundreds of bills on the Governor’s desk worthy of his veto. Additionally, Democrats inserted partisan policy decisions within the budget in such a way that the Governor may need to veto it in its entirety. As Senator Creigh Deeds (D-Charlottesville) noted in his end-of-session constituent letter: “The budget includes items the Governor does not support, and some of those may be difficult for the Governor to veto because they are woven into the fabric of the budget itself. Speculation is rampant that he may opt to veto the budget, which would set us up for another prolonged budget debate.”

Governor Youngkin should not hesitate to use his veto pen liberally, including on the budget. As former Governor Terry McAuliffe (D) said, “The veto is not a decision I take lightly, but it is a necessary tool to prevent harmful legislation from becoming law. I will continue to stand up for the values and priorities of the people of Virginia by exercising this authority judiciously.” Governor McAuliffe had the highest number of vetoes in recent years when he faced Republican majorities in both chambers, vetoing 49 bills in 2017 alone and 120 during his entire term. Continue reading

The Sausage Factory Taxes the Digital Economy

By Steve Haner

The Virginia General Assembly has now jumped into the brave new world of taxing the digital economy, but the sales tax provisions it adopted in the budget conference report Saturday are not the same ones that appeared in earlier budget versions. The cabal of tax raisers in the secret final negotiation got creative.    Continue reading

See, Hear, Speak No Evil on Four Whale Deaths

The Daily Press credits Jennette’s Pier for these two photos it published.

Another whale has turned up dead on a beach, the fourth found on Virginia or North Carolina beaches within one week, several within sight of Dominion Energy Virginia’s offshore turbine project.  This one was identified as a juvenile sperm whale and is the furthest from the project site.

In all the news coverage so far, no intrepid reporter has told their viewers or readers what (if anything) is going on out in the ocean on the construction site. Dominion’s federal license allowing “incidental take” of marine mammals began its five-year effective period in early February. It would be fair to ask the utility if contractors are actively surveying the sea floor with sonar at this time or doing any preliminary pile driving. Continue reading

Whoops!

by James A. Bacon

A recurring debate in Virginia’s push toward a net-zero electric grid has been whether demand for electricity in the Old Dominion will grow or shrink. Citing expansion of demand from data centers and electric vehicles, Dominion Energy has contended for years that demand for electricity would continue increasing at a steady rate. Environmentalists scoffed, saying that conservation measures would enable Virginians to meet aggressive goals to phase out fossil fuel plants and rely heavily upon solar and wind.

I highlighted this debate back in 2018 in this article. Dominion forecast a 1.4% annual increase in peak demand over the next 15 years.

“Actual electricity demand growth over the next several years will not come close to Dominion’s inflated 1.3% growth” as forecast in its 2017 IRP, wrote William Shobe, director of the Center for Economic Policy Studies at the University of Virginia. “Something like 0.5% to 0.7% is much more likely. And this is with data center demand.”

“It’s time for Dominion to change its model and assumptions to reflect reality—there is less load growth than predicted, and what load is coming to the Commonwealth comes from companies demanding renewable energy options,” said Will Cleveland with the Southern Environmental Law Center.

So, what’s the story nearly six years later? Here’s the headline from today’s Washington Post: “AI and the boom in clean-tech manufacturing are pushing America’s power grid to the brink. Utilities can’t keep up.” Continue reading

Is Dominion-Stonepeak Deal a Partnership Flip?

By Steve Haner

Dominion Energy Virginia insists that its decision to sell a half-interest in the Coastal Virginia Offshore Wind project “won’t impact ratepayers.” The problem is, perhaps it should. Perhaps Dominion is creating additional value for its shareholders that instead should benefit ratepayers. Continue reading

Killing the Digital Goose for Its Golden Egg

Jared Walczak of the Tax Foundation

By Steve Haner

The last time the General Assembly made a similar mistake with the Virginia tax code was 20 years ago. It was 2004, and the complaints that business was not “paying its fair share” came from Republicans in the House. They introduced and quickly pushed through a bill that stripped sales tax exemptions from multiple categories of business. Sound familiar?

Twenty years later the only thing that has changed is that the bad idea is now coming from Senate Democrats. The anti-business rhetoric sounds the same. The sales or use taxes of up to 6-7% they seek to impose on business-to-business digital transactions (goods and services) will reach into every Virginia company, large and small. It will simply be passed along in higher prices. The only winners are their out-of-state competitors who have no such taxes in their states. Continue reading

RVA Meals Tax: Practically Poetic Injustice

by Jon Baliles

As noted, two weeks ago City Council approved the change to city code to make sure the city’s Finance Department only applies meals tax payments to the month for which the invoice is submitted. So, no more of the shady practice that had been applying a portion of say, May’s tax payment, to an outstanding balance from April’s bill. The reason that’s a bad idea is that the city could put any account in arrears but the business owner never knew because the city had a practice of not informing the business they were in arrears, which led to the crazy snowballing of interest and penalties that resulted in bills of $37,000, $50,000, and $68,000.

Samuel Veney, the owner of Philly Vegan, who was told by the city he owed $37,000 in penalties and interest, was eloquent and forceful at the City Council podium on February 12th. He implored Council not only to listen, but to hear what he way saying — he wanted to make sure they heard how he was missing time with his children and spending too much time dealing with the city’s screw-ups instead of working at his business. Said Veney:

What we are saying to y’all right now is to take the opportunity to make change happen. It shouldn’t have gotten this far and now that it has you actually have the opportunity to actually make change happen in a better way for our city. Continue reading

A Veto-Proof Local Tax Hike Nearly Approved

Virginia sales tax rates: Light blue, 5.3%, green, 6%, dark blue, 6.3% and yellow 7%. All but the localities in dark blue would be allowed to add another 1% under this pending legislation. Click for larger view.

By Steve Haner

A bill likely to produce $1.6 billion or more in local sales tax increases is moving through the General Assembly with enough bipartisan votes to block any veto from the Governor, but differences remain between the House of Delegates and Senate versions. Continue reading

Democrats Lose Concerns About Taxing the Poor

Econ 101 Quiz. Virginia Democrats are poised to raise the sales tax 1% in most localities, add digital products to the taxed services, and create a new payroll tax. How will those changes impact that chart? Click for larger view.

By Steve Haner

A piece of Republican Governor Glenn Youngkin’s tax package has survived after all, but only the part that increases the sales tax base to collect about $1 billion or so more per year from citizens. Democrats who recently complained that sales tax increases were unfair to the poor are suddenly embracing them. 

On Sunday, both the Virginia Senate and the House of Delegates budget committees approved Youngkin’s budget language to impose the sales tax on a host of digital products and services, adding 6% or more to the prices of downloads, streaming services, and online data storage. The full range of newly taxed transactions is not yet clear. 

The Senate then increased the gain to the treasury by making sure the new taxes will also cover business-to-business transactions, something the governor sought to exempt and something which is just passed along in higher prices.  

The risk of including that tax policy initiative inside Youngkin’s introduced budget bill was obvious from the start, and General Assembly Democrats have now pounced on the opportunity to capture that revenue. The tax increase is now wrapped in with all the state spending for two years, a hard bill to vote against.   Continue reading

Four Major Progressive Goals Still Advancing

By Steve Haner

The aggressive progressive agenda working its way through the 2024 Virginia General Assembly has lost some steam at the halfway point, but at least four of the major Democratic goals discussed earlier are still advancing.   

The two bills which will have the greatest impact on the Virginia economy are the proposed minimum wage increase and a new state-managed employee benefit for workers taking time off under the Family and Medical Leave Act. The two other bills the Democratic majorities in both the Virginia Senate and House of Delegates have now approved are a major expansion of procurement preferences for minority vendors and allowing class actions in civil litigation.   Continue reading

If Assembly Wants SMR Bill, Then Fix It

By Steve Haner

This is progress. Only twenty members of the Virginia Senate voted Tuesday to ignore a key tenet of utility ratemaking and put utility stockholders and profits ahead of consumer protection. Usually when the utilities persuade the General Assembly to do that to Virginia consumers, they get a bigger vote margin than 20-16.*

Senate Bill 454 allows Virginia’s two monopoly electricity providers to spend undetermined millions of dollars on planning and developing small modular nuclear reactor projects and get it all paid by consumers, with a profit margin. But there is no guarantee any such plants will ever be built, and no other power plants built in Virginia have gotten this kind of up-front financial guarantee before the State Corporation Commission ruled them in the public interest. Continue reading

Analog Tax Policy is Harmful in a Digital World

By Chris Braunlich

To many, testifying before a government committee conjures visions of the drama surrounding the McCarthy, Watergate, or Zuckerberg hearings.

In Virginia, not so much.  Faced with processing more than 2,600 bills in 60 days, the legislature conducts hearings that are often more of a kabuki dance, while backstage choreographers figure out the next steps.  Speakers are frequently limited to one minute and sometimes committee chairs simply ask the roomful of citizen and professional lobbyists to stand in support or opposition to a bill.  It is rarely deep and incisive content.

But these hearings are ideal opportunities to test the waters, grab a headline, position your bill for the future, ask a question directly of a bill’s sponsor, or determine where your adversaries are coming from. Continue reading

The Case for an RVA Meals Tax Amnesty

Richmond City Hall

by Jon Baliles

Today we are posting a special edition featuring an email from former restaurateur Brad Hemp that he recently sent to City Council about the meals tax fiasco you have probably heard about as a result of seven years of neglect at City Hall. The Mayor raised the meals tax in 2018 to help build new schools and pledged in return he would also help the restaurants. He raised the tax, and three schools were built, but he forgot about helping the restaurants.

Now, here we are, years later, and the only thing coming from City Hall are vacillating and daily changes and pledges to fix the problem on a “case-by-case” basis (in a vain attempt to get the media stories to stop). As someone who lived and breathed the restaurant business (and could teach the Mayor and Council a few things about it), Hemp has some suggestions to fix the mess. The question is, will the Mayor and City Council finally listen and do something?

RVA 5×5 — PREFACE
The best government is almost always the one that listens. It makes it easier for people to enjoy their lives, better their neighborhoods, open or run a business, and have fun. The worst government is almost aways one that pretends to know everything and thus ignores listening to or helping the people by doing things like, just as an example, forcing through a second casino referendum right after the first one lost. Another way to demonstrate bad government is to find straw-man excuses for erroneous billing of residents for personal property, real estate and water, and misapplying payments of meals taxes for restaurants and never notifying anyone when a bill is late while interest and penalties skyrocket. The “leaders” at City Hall say it’s the fault of state code, or the postal service, or bad technology, or the current lunar cycle. Don’t look inward to see if it’s an internal problem, blame it on everyone and everything else. Continue reading

Rare SCC Deadlock Sinks Dominion’s Energy Plan

By Steve Haner

The year long debate over Dominion Energy Virginia’s proposed integrated resource plan, which threw climate catastrophe activists into a frenzy because it added a new natural gas plant, is ending with no decision.  Two State Corporation Commission judges split on whether to approve it, basically a win for the anti-fossil fuel forces.

In December, a hearing officer assigned to study the case had ruled that Dominion’s plan should be rejected because it included the expansion of gas generation, when the anti-natural gas forces in the General Assembly had passed laws against that 2020 and 2021.  Those laws did include provisions for maintaining or adding fossil fuel generation on the basis of a threat to reliability, but only under limited circumstances. Continue reading