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
