Critics of a proposed 5 percent tax on vehicle repairs warn that the measure could lead to other levies that would damage Northern Virginia’s robust economy.
Virginia, like most states, imposes a sales tax on goods, but it traditionally has not imposed taxes on services. The tax on repairs, if approved tonight by the Northern Virginia Transportation Authority, would be an exception to that approach and, critics say, the first step to more taxes on services.
About 65 percent of the jobs created in the national capital region in the past year are in the business and professional-services sector, according to the Greater Washington Initiative.
“One of the reasons the services industry in Northern Virginia has taken off [is] because it has not been burdened with taxes,” said Sen. Jay O’Brien, R-Clifton. “Some people feel the tax on vehicle repairs is like the camel’s nose under the tent. What services will be taxed next?”
The tax on vehicle repairs is part of a package that would raise $400 million a year to fund transportation projects in Northern Virginia. The provision was not in the initial legislation the General Assembly approved in February. Gov. Tim Kaine inserted the tax into the bill in April to help make up for revenue lost when he eliminated a proposed tax on commercial real estate in Northern Virginia.
Kaine spokesman Kevin Hall said the governor does not intend to propose taxing additional services. The repairs tax, Hall said, was added because of its “direct link” to road users and concerns that a commercial real estate tax would drive economic development out of Northern Virginia.
Whitney Duff, who directs the Americans for Prosperity’s Virginia chapter, isn’t so sure state officials will not try to tax additional services. Governments, she pointed out, are not likely to give up revenue sources. The federal government needed more than 100 years to repeal a telephone excise tax it implemented to fund the Spanish-American War in 1898, for example.
“Increasing taxes on services will reduce the public’s personal spending and that certainly hurts the economy,” Duff said.
