I’ve often heard that if there is a way to tax something, Norfolk will figure it out. But tax a tax? It seems that Norfolk’s Commissioner of the Revenue Sharon McDonald has figured out how to do that, too.
The plan is to place a levy on the 36.5 cents per gallon in state and federal taxes that consumers pay on each gallon of gas. This will be done by expanding the business professional and occupational license tax, known as the BPOL tax.
The justification for the imposition of the BPOL tax can be found in this opinion issued in February by then-State Tax Commissioner Ken Thorson. Basically, it relates to a 2001 change in whom the excise tax, both federal and state, is imposed on. These taxes are no longer imposed on retailers, although, if I am reading the opinion correctly, they continue to remit it to the distributor, who sends it to the supplier, who sends it to the government, although distributors and retailers “may or may not choose to include the tax in the sales price of the motor fuel sold to consumers.” (Now, what’s the likelihood that it is not passed on?) Since the retailer doesn’t remit the tax directly to the government, the collection of it cannot be excluded from gross receipts for purposes of the BPOL tax.
So McDonald has been notifying gas dealers that they will be paying taxes – on the tax.
But then again, maybe not.
[House Finance Chairman Bob] Purkey said legislation to block the proposed Norfolk tax increase is already being drafted.
VIVIAN J. PAIGE | All Politics is Local 
That sounds almost as bad as income taxed at the corporate level, and then taxed again at the individual level when it goes to the owners of the company (in the form of dividends).
Very few dividends end up in the hands of consumers that result in double taxation. The bulk of the dividends go to other corporations, who get a dividends received deduction (up to 100% of the dividends, depending on the ownership of the underlying stock). The other issue with dividend taxation is that a company can pay dividends without having paid taxes on the earnings. (That alone was one of the major sticking points in why dividends are not completely tax free.) So the overall double taxation argument is much more complicated than it looks.
This one is simple – at least to me. It is a tax on a tax, which makes no sense at all.
Actually, it makes no sense to tax corporations at all. Where will the corporation get the money to pay their taxes? By raising their prices. So the consumers always pay in the end.
“By raising their prices. ”
Or lowering their profits…
It makes even less sense to tax individuals. Where do they get the money to pay their taxes? By cutting back on spending. Think what that does to the corporations.
Kevin — Profits that go to the owners are taxed at the individual level. Those that do not build the company. If you take away the profit, people will not invest in businesses.
Randy — I agree. Adam Smith (The Wealth of Nations) argued quite convincingly that the best tax (which gets the most revenue for the least damage to the economy) is a tax on the rent of land. (This is NOT a real-estate tax, but a tax on RENT.)
Well, I guess higher gas prices are all the rage now, meanwhile no efforts are made to find new sources of energy. With this at the local level, and rabble rousers like Jim Webb calling for “Windfall Profit Taxes,” I suppose it’s time for me to dust off my roller blades … until Democrats figure out a way to tax those as well.