Food tax reduced by 1.5 percent

Published 12:00 am Wednesday, March 23, 2005

Completes planned reduction in one step instead of three

Staff Report

Gov. Mark R. Warner on Tuesday signed legislation that reduces the state portion of the sales tax on food by 1.5 percent, completing the rollback in one step instead of three incremental steps scheduled over the next two years.

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The rollback will save a family of four with a household income of $60,000 approximately $83 per year, according to the Virginia Department of Taxation.

Beginning July 1, only the 1 percent local option sales tax, the 1 percent portion of the sales tax distributed to localities on the basis of school age population, and the 0.5 percent

portion allocated to the Transportation Trust Fund will remain in effect.

Eliminating the state portion of the sales tax on food has been a goal for many policymakers for nearly 40 years.

The 1999 General Assembly voted to reduce the state tax rate on food by 0.5 percent per year over a four-year period, but only the first

0.5 percent of relief was provided.

Warner’s budget and tax reform program, enacted with bipartisan majorities in the 2004 General Assembly, re-started the scheduled rollback over a period of three years, ending in 2007.

&uot;This is an opportunity to use part of the unanticipated revenues from Virginia’s recovering economy to speed sales tax relief to those taxpayers who need it the most,&uot; Warner said at Tuesday’s ceremonial signing at the State Capitol.

&uot;Since lower-income people spend a larger percentage of their incomes on food-an obvious necessity-this measure will dramatically reduce the regressive nature of Virginia’s sales tax.

&uot;And speeding-up the timeline will save retailers and other vendors both time and money by eliminating the need to make three separate changes to their computer and bookkeeping systems.&uot;

Accelerating the food tax reduction will eliminate $99.1 million in anticipated state revenue for fiscal year 2006 and $57.7 million in 2007.