- The Washington Times - Tuesday, January 6, 2004

RICHMOND (AP) — A coalition representing 5,000 small businesses opposes Gov. Mark Warner’s proposed reforms to Virginia’s tax code.

The National Federation of Independent Business is one of the first such groups to weigh in on the debate over Mr. Warner’s tax package, which is likely to dominate the General Assembly session that begins a week from today.

The opposition is an obstacle the Democratic governor had hoped to avoid as he seeks to win approval for his proposals from a Republican-dominated legislature.

The federation said Monday that Mr. Warner’s plan to help solve the state’s budget problems by raising $1 billion in new sales-tax revenue during the next two years threatens to undermine the economic recovery.

“Our members think that the legislature and the government need to focus on continued spending cuts and not tax increases,” said Gordon Dixon, the group’s chief lobbyist in Virginia. “These tax increases will take money out of the pockets of small-business owners, which means they won’t be able to invest in their businesses and create new jobs.”

The group decided to oppose Mr. Warner’s plan after surveying its members. It said that about 60 percent of the 400 businesses that responded opposed the plan, 30 percent liked it and 10 percent were undecided.

The federation’s position signals a potential split between small and big business over the need to raise money to pay for better roads and better schools to train the work force.

The Virginia Business Council, a group of about 30 chief executives of some of the state’s largest companies; the Fairfax County Chamber of Commerce; and the Northern Virginia Roundtable, which represents information technology, government contracting, real estate and other businesses, have not officially endorsed Mr. Warner’s plan. But all are supportive of his approach.

“Money has to be invested in our infrastructure; otherwise, businesses won’t want to move here and people won’t see Virginia as business-friendly,” said Mike Anzilotti, the Virginia Business Council’s chairman and the recently retired president of First Virginia Bank.

Virginia, like many other states, faces a major gap between its expenses and revenue.

“This is beyond a short-term thing that we can tweak or grow our way out of,” said William D. Lecos, president and chief executive of the Fairfax Chamber of Commerce.

Mr. Warner’s plan would increase taxes on cigarettes, other goods and some corporations. The plan also would cut taxes on cars and groceries. It would create a new top bracket for Virginians whose taxable income is more than $100,000, while increasing deductions for lower-income residents.

Warner spokeswoman Ellen Qualls said the governor’s plan has provisions that will help small businesses.

The proposal would eliminate estate taxes for farms, closely held businesses and personal estates worth less than $10 million. It would end a practice that forces retailers to effectively float the state a loan by forcing them to prepay sales taxes they have not collected. It also would give businesses greater tax deductions on equipment purchases.

“We find that small- and medium-size businesses turn to the state for a number of services, like worker training and retraining, business-plan-development assistance and access to low-interest loans,” Miss Qualls said. “Without the governor’s plan, or one very much like it, those services would be near the top of the list for elimination.”

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