Senate candidates disagree on insourcing, online sales tax


Virginia Senate candidate George Allen (R), above. (Jeffrey MacMillan/Capital Business)
July 1, 2012

Senate candidates George Allen and Tim Kaine last week criticized insourcing — or cases in which the government moves work done by contractors in-house — but suggested different approaches to dealing with the policy.

Speaking before Northern Virginia Technology Council members in a town hall session, Kaine, who previously served as the commonwealth’s governor and as chairman of the Democratic National Committee, acknowledged that the issue affects two key constituencies.

As a Virginia senator, “part of the job description is you’ve got to care a whole lot about contracting, and you’ve got to care a whole lot about federal employees,” he said, adding that he would reject a moratorium on insourcing.

“Frankly, I’m an agnostic,” Kaine said of whether work should be done by contractors or government employees. “I think the devil is in the details and, in particular, the devil is in how you do the comparison” between the costs of government employees and contractors.

Allen argued that the policy is bad for business and for taxpayers, and he backed a moratorium.


Virginia Senate candidate Tim Kaine (D). (Jeffrey MacMillan/Capital Business)

“I think we’re better off using private sector folks,” Allen said. Once the work is completed, the government won’t face “the tail of all the retirement benefits, pension benefits” associated with government employees.

On the subject of sequestration — a roughly $1 trillion cut to federal spending that would begin in January and has many of NVTC’s members concerned — Kaine said that if he were in office now, he would encourage the White House, the Pentagon and members of Congress to propose an alternative plan.

“It’s much better to have a package that is the right cuts, not the wrong cuts,” he said. “I think frankly that [the Defense Department] could do a much better job of deciding what the right cuts are.”

Allen — a Republican who previously served as Virginia governor and as a U.S. senator representing the state — said the impending reductions represent a failure on the part of Congress.

Noting that the cuts are set to begin before a new senator would be sworn in, Allen looked to long-term changes, such as requiring a balanced budget.

“Otherwise, you’re going to get more of these Band-Aid approaches,” he added.

The two candidates differed on an unrelated issue: whether online businesses should face state sales taxes.

Kaine, on the one hand, said traditional brick-and-mortar retailers shouldn’t be disadvantaged.

“Brick-and-mortar retailers ... have been holding down the Main Streets of our communities for generations. Increasingly, they face a challenging competition from those who sell the same goods via Internet,” he said. “I think that long-term we’ve got to find some strategy that would produce more equity.”

Still, he said there could potentially be a waiver or exemption for small businesses that would face a hardship from trying to comply.

Allen argued that the fundamental principle is that businesses without physical presences in a jurisdiction do not use local services and should not pay taxes to those jurisdictions.

“Just because it’s technology and it’s [the] Internet doesn’t mean you abandon fundamental principles,” he said. “It would be very burdensome — particularly to small businesses — to comply.”

The two candidates agreed that political dysfunction is rampant and vowed to work across the aisle.

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