Friday, February 19, 2021

You Can Make a Difference ...

Dear Friend,

A new report from the state shows that Virginia will collect $730 million more than expected in sales and income taxes over the next two years.
Will these funds be used to lower taxes on employers who saved hundreds of thousands of jobs at more than 100,000 workplaces during the pandemic? 
Or will they be used to build bigger government and expand the bureaucracy?
I’m writing to ask your help for those who kept Virginians on the payroll and off the unemployment and welfare rolls … Virginia employers like restaurants and local stores who are still struggling.
This is a defining moment in Virginia:  On one side are those who believe “You should earn what you get and keep what you earn.” On the other are those who say, “What belongs to the state is the state’s and what is yours is negotiable.” Which side are you on?
Here is the issue: Employers took Payroll Protection Plan grants to save jobs during the pandemic. Congress decided that PPP loans are exempt from any federal taxation and many other states are conforming to that.
But Virginia’s liberal leaders are sending another message: “We decide how much of your money you get to keep.” The Northam Administration wanted to keep it all in the state budget. The State Senate would exempt PPP grants of up to $100,000. But the House of Delegates would only allow $25,000 to be tax free, and only for unincorporated businesses. Most Virginia employers would be taxed.
Here is the message: It is wrong to tax the PPP grants. Legislators should vote against taxing those grants. At the very least, they should adopt the Senate version of the state conformity bill.
Any contact with your Delegate or State Senator in the next few days is critical. It will be decided that quickly. 
You can find the name, phone number, and contact information for your Delegates and State Senator by clicking here.
Here are the details: The decision to tax PPP grants in excess of $100,000 is already a bad signal about Virginia’s new attitude that employers are to be taxed, regulated, punished, and blamed rather than encouraged. Following the House approach to basically tax it all would double down on that message. 
The debate over tax policy has been tangled up in the state budget because the Senate’s choice to exempt $100,000 produces about $70 million less in state tax revenue. House Democratic leaders want to spend that additional $70 million. They want to “negotiate” with the Senate.
There should be no further negotiation. The Senate approach should prevail. Most Virginia employers received PPP grants of $100,000 or smaller, and thus would be exempt from this unexpected tax bill under the Senate’s provision. 
And the $730 million in unexpected revenue makes this easy to happen. The Northam Administration is acting out of greed, not need.
Under normal circumstances the costs paid for by the PPP grants could not be deducted because they were paid for by the grants.
But is anything you and I have lived through in the past year “normal?” Of course not. Even the Nancy Pelosi-controlled Congress recognized that! That’s why Congress made the expenses paid for by the loans tax-deductible! Virginia should follow suit.
One in five small businesses have disappeared in this country – even in Virginia (see here). The employers who stayed in business, took the grants, and kept their employees working were taking a chance. They had no guarantees.
Now, Virginia wants to punish them more.
The state is shamelessly double dipping.  With PPP keeping payrolls intact, the state continued to collect payroll and sales taxes from workers, who continued to pay rent and utility bills, too. Those workers did not seek unemployment benefits (a system that had crashed under mismanagement) or other public or private assistance. That was hugely beneficial to Virginia. And now the state wants more. 
Contact your legislator today. Tell him or her: When it comes to PPP loans, conform to the federal tax code or, at the least support the Senate version of the state conformity bill.
If we can answer any questions or concerns, please do not hesitate to email us. We will promptly get back to you with answers.
Christian N. Braunlich
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The Thomas Jefferson Institute for Public Policy

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