McDonnell Gives Virginia Democrats a Big Issue in 2013 — If They Have the Guts


    ( – promoted by lowkell)

    by Paul Goldman

    If today’s Virginia Democrats don’t know how to play this game, then perhaps it is time to let those of us who actually have a record of showing candidates how to win statewide races for Governor – it takes more than writing for a blog folks hate to tell you – to be put in charge for say 90 days to show you how it is done.

    Earth to Virginia Democrats: with this move on, Governor McDonnell has given you a great 2013 issue. Namely: the logical consequences of McDonnell’s anti-Virginia-small-business policy (in letting Amazon not pay the sales taxes that Virginia-based businesses must pay) is to risk raising income and property taxes, hurting road funds, damaging the state’s small businesses base, shortchanging education, localities — and that’s just a quick list.

    Look, I respect the Governor. I specifically applaud his work on a very vital education initiative, joining with Webb/Warner/Cantor/Allen/Kaine in a novel approach praised around the state (but not by the Washington Post strangely enough, but more on that in another post.)

    But with all due respect, Mr: McDonnell: sir, you have forgotten the most basic axiom fiscal conservatism, as stated by Chief Justice John Marshall, who lived a few blocks from what is now the Governor’s Mansion.

    So let me update it relative to your policy favoring a giant, out-of-state corporation over longstanding Virginia small businesses. “Using gubernatorial power to make sure the biggest company can avoid having to charge the same fair tax small business are forced to charge amounts to the power to destroy these small business.” I think CJ Marshall would think this is fair way to express his view 200 years later in the famous bank tax case.

    Frankly, it surprises to see the Governor back what the base of the GOP – the state’s small businesses – have publicly said is anti-business, unfair, and a violation of free market principles (which some of us still actually support).  

    I refer, of course, to the McDonnell support for the policy which allows the likes of Amazon to avoid doing what they are actually prepared to do, and are/will do in other states happily (indeed, to do what every small business has to do in VA for over 40 years). That is: collect the sales tax due on the kind of transactions done by Amazon.

    For all these years, Virginia businesses have gladly done this because the public agrees that the sales tax is the fairest one for funding schools, state police, prisons, among other vital parts of state operations deemed the responsibility of the Commonwealth since at least TJ was Governor.

    In the 1980’s, the sales tax was raised to help fund transportation with Republican support. In 2004, it was again raised  under Governor Mark Warner and the GOP General Assembly, when they voiced concerns about making sure Virginia kept a level playing field for businesses in the future relative to the state’s fiscal posture, among other reasons admittedly.

    Now comes 2011.

    Yesterday, the Governor announced that online retailer giant is going to bring over 1,000 warehouse-related jobs to Virginia as part of its growing distribution network. That’s good work sir.

    But apparently, they were also told, even if it was just “wink, wink,” that the supposedly conservative Governor has agreed to use his powerful influence to keep the state’s current biased policy intact — a policy which benefits Amazon unfairly at the expense of the state’s small businesses, who helped built our Commonwealth over the years.

    That’s to say: Amazon will not be required to collect the sales tax, but their small business competitors, already at a cost disadvantage, must do so, adding the sales tax to the total price paid by the consumer for their products.

    Perhaps because I am among the last of the fiscally conservative Democrats – that’s why Warner and Wilder asked me to write their fiscal stuff – this McDonnell policy strikes me as a huge opening for Democrats.

    As commerce moves online, the McDonnell policy means less and less money to keep long-time state commitments to fix roads, aid localities and schools, state police protection, prisons, down the list of vital state services.

    The sales tax is the bedrock of state commitments here. So the only way to make up for the shortfall is to raise income taxes and property taxes, or charge businesses crushing new fees (which Amazon would not have to pay either!), or add a host of other special taxes and charges.

    In effect, Mr. McDonnell is encouraging Virginians to buy from an out-of-state company, at the expense of Virginia companies. This is the job of the Governor of Virginia?

    Amazon knows this gives them an unfair advantage earned not by merit, but rather by political influence.

    Now, I know it is probably too much to ask Virginia conservatives to be principled here. Of course, if President Obama took the same position, it would be called “socialist” or something.

    Yes, Virginians buying on Amazon get the same item 5% cheaper, all other things being equal. I get it. But in return, they drive their friends and neighbors out of business due to unfair competition. Next time, some powerful influence may find a way to put you at a disadvantage. Who’s going to want to help you then?

    Now, if there were a merit basis for giving Amazon such an unfair advantage- and other onliners as well – that would be one thing. But the sales tax is suppose to be collected: the truth is, the Virginia consumer still owes! That’s right, it’s the law — check it out.

    Governor, this is not a policy that a conservative businessperson can honestly say is either fair, merit based, or free market. It is really crony capitalism at the expense of the middle class, small business owners who are the backbone of the state’s business community.

    Democrats need to unite to change it.

    Sure, McDonnell will accuse us of wanting to “raise taxes”, the whole mantra. I trust the people of Virginia to know the truth, and support those who are looking out for their long-term interests, not for a big, wealthy, out-of-state corporation.

    • glennbear

      Amazon was lured here partly because of gifts from the governor’s corporate giveaway slush fund and the tobacco fund.

      I am glad that you mentioned the sales tax is still due from buyers even though mega online vendors like Amazon do not collect it for the state. Virginia online shoppers for the most part fail to report or pay the sales taxes due when they file their income tax return. These same folks have to realize that the revenue lost has to come from other sources so there is no free ride in life and the time for this one to end has come.

    • glennbear

      A story that was posted online today :

    • Elaine in Roanoke

      On-line retailers will tell you that the various levels of sales tax in different states add to their cost and that’s why they don’t want to collect the taxes. That’s bunk. And, if Amazon is to become a company with a presence in Virginia, then other competitors – not just small businesses but big box stores like Walmart – should be up in arms at the unfairness.

      You are quite correct. This is a great possible issue. However, I don’t believe for a minute the Democrats will touch it.

    • glennbear

      Amazon cannot act like collecting VA sales tax would be a unique operation for them. They already collect sales tax in at least 6 other states.

      From a Wall Street Journal Blog:

      Washington has not been entirely silent on this issue, there is at least one bill making it’s way through Senate comittees:

    • The Richmonder

      Here’s an interesting paper on the subject.….

    • Mike1987

      Republican response in the effective form of a bumper sticker: Dems raise taxes.  That is all Virginians will hear. The complex argument cannot be made in an election. Remember, we Virginians voted for more republicans and now they control everything.  Simple statements for simpletons. If not, we get creamed.

      This is not a Woody Allen movie.  Simple, straightforward and positive

    • totallynext

      Bring it up at rotary, chamber forums, etc.

      Get the local business educated.  

      As one who has administered sales tax reporting, the challenge is not only the state rate but variable local rate which make reporting extremely burdensome on smal business like services that cover broad localities.  It appears that in va it is somewhat straight forward with 4% state and 1% locality.  So amazon would not to have huge rate tables just sales tied to delivery location for reporting.   Also if I am not mistaken that a va based online merchant has to charge and collect sales tax for va deliveries so that is another disadvantage for va business, additional admin expense.

    • Elaine in Roanoke

      This is, after all the computer age. The added administrative cost for figuring out varying sales tax rates is meaningless. The cost comes in forwarding the taxes to the various states and localities. That’s why, in anticipation of ever greater online sales, many people have advocated states joining together and having a common online sales tax rate and funding a joint office that could forward the taxes to the various jurisdictions. (Good luck on that!)