University of Virginia Library

Sales Tax Called Evidence
Of Concern For Education

The 1966 passage of the Virginia
sales tax reflected, among other
things, a growing concern in the
State for public education.

In the current "University of
Virginia News Letter" published by
the Institute of Government.
Michael S. Deeb, executive assistant
at the Institute, and Stuart W.
Connock, director of the sales and
use tax division of the Virginia
department of taxation, report on
"Virginia's Sales Tax: Its Original
and Administration."

Conditions in Virginia during
the mid-Sixties were ripe for the
enactment of a sales tax, the
researchers say. The mood in the
State seemed to have changed from
acceptance of the status quo to a
more progressive spirit. The gulf
between educational offerings and
opportunities had widened, and the
cost of education had drastically
increased.

The General Assembly representation
had changed form predominantly
rural conservatives to
more moderate-progressives as the
urban population grew. Many Virginia
cities were beginning to adopt
local sales taxes for their own use
to the exclusion of the State.

"A major factor in the adoption
of the sales tax was the effective
and able leadership provided by
Governor Mills E. Godwin Jr.," says
Deeb and Connock. Governor Godwin
was able to unify the factions
of the Democratic party on the
issue of improving public education,
they say.

After Governor Godwin
assumed office, he proposed a 2 per
cent State general sales and use tax
to take effect September 1, 1966,
to be increased automatically to 3
per cent on July 1, 1968.

One per cent of the tax would
be distributed to Virginia's cities
and counties according to
school-age population to be used
for free public schools. One per
cent would be deposited in the
State's General Fund. Cities and
counties would be permitted to
enact an additional 1 per cent levy
for their own use.

Despite the fact that Virginia
cities argued that the State tax
would result in a loss of revenue for
them, the bill as proposed by
Governor Godwin was passed by
the General Assembly.

In order to develop a modern
collection system, members of the
State department of taxation
visited several Southern states already
imposing sales and use taxes
to gather background material.

A new sales and use tax division
with hundreds of employees was set
up in the taxation department.
Electronic date processing equipment
was used to process between
72,000 and 75,000 returns each
month.

During the fiscal year of 1969,
following the increase to 3 per cent,
revenue from the State and local
sales and use taxes was $250.3
million, an increase of 128 per cent
over the fiscal year of 1967 (which
only represented nine months).

The State and local sales and use
taxes have "allowed Virginia to
meet many of its present and
immediate public commitments. It
has been particularly significant in
enabling Virginia to move ahead to
improve public education," say
Deeb and Connock.

Although the sales and use tax
division is in need of more personnel,
especially auditors, it "has been
conducted efficiently in order that
State taxpayers receive the
maximum benefits," say the researchers.

"The U.S. Advisory Committee
on Intergovernmental Relations was
so impressed with the Virginia sales
and use tax law that it modeled its
proposed law after the Virginia
statute.

"This is indeed a compliment to
Virginia and to the author of its
sales tax law, Mr. C.H. Morrissett,
former Virginia Tax Commissioner,"
say Deeb and Connock.