Think college tuition is high now? How would you like to pay sales tax on that?
A group looking for a way to revamp Virginia taxes has proposed extending the state sales tax to college tuition.
By applying the tax to more items and services, Virginia could cut or eliminate business and personal income taxes without losing revenue, a conservative public policy foundation announced Friday.
Among the other things that could be taxed to make up for that lost revenue: legal services, prescription drugs and food stamps.
Those are some of the options laid out in a study presented by the Thomas Jefferson Institute for Public Policy in a conference call with reporters. The research was conducted by Chmura Economics and Analytics of Richmond and paired with a computer model created by the Boston-based Beacon Hill Institute.
The study came up with a number of scenarios, so if taxing tuition or health-care services proves to be a non-starter, the whole restructuring plan doesn’t sink. You can read the full study here.
“By expanding the current sales tax to most of the industries that do not now collect it from their end user individuals, every individual taxpayer can be substantially helped, the competitive business environment for Virginia enhanced and our state and local governments will not lose a penny,” said Michael Thompson, president of the Institute, which describes itself as a “center-right public policy foundation.”
Thompson acknowledged that the poor could be hit hardest by imposing sales taxes on some of the services and items now exempt from it. But he contended that lower-income groups would come out ahead for two reasons: The plan would completely eliminate income taxes for the poor, and it would spur the creation of jobs, some of which would likely go to the poor.
The plan calls for eliminating several business taxes, including the Business Professional Occupation Licensing tax, the Machine and Tool Tax, and the Merchants Capital Tax.
Thompson said he has been meeting with legislators, state officials and business groups to try to sell them on the plan. He expects them to give it a serious look.
“I think there will be a fair hearing on this,” he said. “And in all of this discussion, we have not gotten any dramatic pushback when they’re able to see what the bottom-line economic growth potential is.”