Tax Restructuring

November 30, 1998

Fairfax County Council of PTA’s Position: 
The Virginia State Tax Code should be restructured by the General Assembly to provide local communities' with the ability to reduce their over-dependence on real and personal property tax and BPOL for operating their public schools, providing local services, and sustaining a quality of life of their choosing.

Background: 
Fairfax County Public School (FCPS) system receives nearly 74% of its operating revenue from Fairfax County. The State of Virginia provides approx-imately 22%. The Federal government contributes a little over 1%. The remainder of the funds is generated from a variety of sources including grants and user fees.

Fairfax County generates its revenues primarily from four sources -- real estate tax, personal property tax, sales tax, and BPOL tax. Real estate tax revenue (at approximately 65%) and personal property tax (at approximately 21%) provide the bulk of County revenue. County annual revenue growth has been forecast to stay relatively flat and not to exceed 4-5% within the foreseeable future. This forecast was made prior to the planned elimination of the personal property tax.

FCPS has experienced significant student growth in absolute numbers (approximately 4,000 students in FY99 alone) and in terms of students with special needs [e.g., ESL and special ed]. FCCPTA's analysis has demonstrated that since the recession years earlier this decade, inflation-adjusted revenue growth, combined with student population growth and diversity, has resulted in about an 18% drop in per pupil spending, despite a $.06 increase in the real property tax that was imposed in FY97. Despite FCPS' many efficiency gains since 1991, the fact that property tax has not grown commensurate with the local economy has meant that FCPS remains burdened with larger class sizes and "temporary" classrooms, while serving an ever growing and more diverse population.

Discussion: 
A tax on real property has proven to be vulnerable to recessionary pressures, are overly regressive, and bear little resemblance to disposable income. The personal property tax, which has many of the same characteristics, is being phased out, but without a reliable revenue replacement that is under local control. A Task Force empanelled by Fairfax County School Board has noted that County revenue "fluctuates with the value of fixed assets and, with the exception of sales tax, is at best only indirectly linked to the income of its taxpayers." We concur in this tax restructuring position with the recommendations made by both the Fairfax Board of Supervisors and the Chamber of Commerce.

Recommendation: 
The General Assembly should revamp the State Tax Code revamped to permit a more diversified local tax base.
 

Last Updated 01/27/2005 20:22:31