Committee Looks At Loopholes In Va. Tax Code

While lawmakers on Capitol Hill are considering revisions to the federal tax code, lawmakers in Virginia are evaluating their state tax code.  The Joint Legislative Audit and Review Commission is studying billions of dollars worth of credits, deductions and exemptions and the watchdog agency says only some work the way they were intended. 

Many of the tax preferences, such as sales tax relief for food, were enacted to achieve policy goals. In 2008, they reduced taxpayer liability by $2.9 billion. But Ellen Miller, the project leader for JLARC's recent tax report, says some goals to provide tax breaks for people with lower incomes also helped others.

 "Only two preferences, the age deduction and low income tax credit, did so efficiently and provided the majority share of the reduced liability to intended beneficiaries," Miller says.                                                                                                 

For example, tax breaks to help save for college were only somewhat effective. In other cases, "we found that preferences promoting the coal industry, nonprofit activity, and long-term care insurance were unlikely to achieve their goal," Miller says. The report recommends creating an oversight panel to assess all special tax preferences in the state.