Translate[Archived] Question #02: What are the possibilities of advocating for more local authority in regards to city revenue generation such as a potential progressive tax, income tax or other revenue generation?
Question
What are the possibilities of advocating for more local authority in regards to city revenue generation? What are our options in terms of a potential progressive tax, income tax or other revenue generation? (Councilman Aguirre)
Response:
Increased local taxing authority is highly desirable to bolster the long term fiscal viability of the City and other Virginia municipalities. Virginia local tax authority is based on a 19th and early 20th Century property based farming and industrial economy and not a 21st Century service economy. For example, Virginia localities should have access to the State income tax as do Maryland localities. Also, the State sales tax does not tax the service economy which now represents a far larger segment of consumer purchases, than it did when the sales tax was created as a “goods” consumer tax.
In response to advocating for more local authority in regards to City revenue generation, Virginia is a “Dillon Rule” state. The Dillon Rule, which the Virginia Supreme Court adopted in 1896, is a legal principle that local governments have limited authority and can pass ordinances only in areas where the General Assembly has granted clear authority.
In addition, any proposals that advocate for local taxing authority that is specific to Alexandria would be considered “special legislation” and requires a supermajority 2/3 vote of each house of the General Assembly to pass. As a result, even if the General Assembly majority parties change in 2019 and a less anti-tax political atmosphere occurs, any expansion of local taxing authority would likely need to be applicable to all Virginia cities and/or counties with statewide applicability of any increased local taxing authority. In order for that to occur, there would need to be a statewide coalition/interest to press the General Assembly for increased taxing authority.
Any additional local taxing, such as a progressive or income tax, authority might come with the requirement of a local referendum, as was the case in the 1980’s when a local income tax for transportation and education was authorized, but by local referendum only. No locality initiated the regional referendum as it was assumed that such referendum would result in a “no” vote.
The City’s legislative delegation is scheduled to attend the April 9, 2019 City Council Legislative Meeting to discuss this year’s General Assembly session. Proposals for next year’s legislative agenda will be due in August so that a draft legislative package can be presented in October and a public hearing held in November. Staff recommends that Council request the Budget and Fiscal Affairs Advisory Committee (BFAAC) to prepare a report on potential tax revenue initiatives by the end of September. Council then could decide what new revenue initiatives to include in its legislative package.