Stolen Without A Gun March 24, 2010
Posted by grovetonsvirginia in Uncategorized.trackback
Overview: A recent article in the Virginian-Pilot illustrates how the game is really played in the General Assembly. It seems that a bill to tax online hotel booking companies (SB452) had been sailing through the General Assembly for months until it was noticed by that industry’s lobbyists. Then, quicker than you can say “special interest”, the bill was dead. You can read the article here.
Thinking it through: Mary Margaret Whipple has some straight-forward logic. A person who walks into a hotel and books it for $50 has to pay a tax on $50. If the tax is 5%, the total paid is $52.50. $50.00 for the hotel and $2.50 for the state. An online hotel booking site buys the room for $30.00 then sells it to an online shopper for $40.00. The tax is still 5%. How much does the government get from this transaction. Most would guess 5% of $40 = $2.00. Most would be wrong. The state gets 5% of $30 = $1.50. Why? Because the online booking company says they sold the room at their cost ($30) and then added a processing fee ($10) which is not subject to the tax.
How much does all this financial breakage come to a year? $33M in Virginia. A fair chunk of change.
At least Jessie James used a gun: This bill had been under review for so long that one politician quipped that “crickets were still chirping” when it was sent over. Yet it was killed almost overnight. What caused the untimely death of Mary Margaret Whipple’s handiwork? The dark spectre of lobbyists. Those soulless zombies who lurk in every capital city walking the halls of power and the bars of influence looking for votes. Unlike real zombies who eat brains these creatures of horror would have an allergic reaction if they came anywhere near a brain. Which makes the friendly confines of the Virginia General Assembly home sweet home for these lobbyists.
Once again our legislators have sold out their constituents. Once again the voter – taxpayers of Virginia are the losers.
You can tell the players without a program: How did this happen? Did the full General Assembly stand up and be counted on this matter? Oh, spare me. Of course not. Spines are the only things in shorter supply than brains in Richmond. The bill was hastily killed in committee. However, you can tell the players without a program in the General Assembly. The vote in the Finance Committee was 13 – 9 in favor of the special interests. Predictably, the vote was almost perfectly along party lines. 13 of the 13 politicians voting with the lobbyists were Republicans. 8 of 9 voting with the people of Virginia were Democrats. Only R.L. Ware (R – Powhatan) had the courage to do the right thing.
Heroes - Ware, R.L. (R – Powhatan), Johnson (D – Abingdon), Watts (D – Annandale), Lewis (D – Accomac), Armstrong (D-Martinsville), Pollard (D – Lively), Englin (D – Alexandria), Abbott (D – Newport News), Keam (D – Vienna)
Zeroes - Purkey (R – Virginia Beach), Orrock (R – Thornburg), Byron (R – Lynchburg), Cole (R – Fredricksburg)*, Hugo (R – Centreville), Cline (R – Amherst), Gear (R- Hampton), Marshall, R.G. (R – Manassas), Lohr (R – Harrisonburg), Peace (R – Mechanicsville), Greason (R – Potomac Falls), Anderson (R – Woodbridge)*, Garrett (R – Lynchburg)
* – the three politicians indicated by an asterisk have embarrassed the people of Virginia multiple times during the 2010 General Assembly session and are candidates for worst GA member of the year.
Um, well . . . not quite. First, as with the individual who purchases a room night from the hotel and pays the tax on that transaction, almost everyone would assume the tax was paid on $30 paid to the hotel by the reseller, not the $40 paid to the reseller by the consumer.
So Senator Whipple was trying to legislate a major and substantive change. The fact that it wasnt controversial from the start, was because Senator Whipple didnt work with the hospitality industry in the beginning to explain her bill and to bring them along into the process. Rather, they were blindsided at the very end on a bill that would have increased their tax liability by $33 Million. I ask you – to be fair – if you were blindsided by a scheme to take an unbudgeted $33 Million out of your pocket, how would you react? My guess is you would make your persuasive arguments against it – and try to legislatively derail it.
I actually think Whipple’s idea has some merit and deserves discussion and consideration. In the next GA session, it might actually pass scrutiny by both Houses. But to shepherd something this significant through the GA without giving a heads up to the industry it would impact is always a prescription for having it stopped dead if/once it is found out.
I see it as an unfair loophole. The end consumer pays tax on the full price of the hotel room if he or she walks into the hotel. However, nobody pays the tax on the full price of the hotel room when it is purchased through a reseller.
The fact that the General Assembly fumbled this ball is just another example of the General Assembly being inept.
As for the sudden rush of hopitality industry lobbyists – was the bill being considered in secret? Was Mary Margaret Whipple operating as some kind of secret agent? The bill passed unanimously in both houses without a peep from the industry. All of which happened in full public view. No, the industry knew they could only kill the bill when it was in a Republican controlled committee so they waited until it got into the Finance Committee. Once there, the industry called on their lackeys in the Republican Party of Virginia who fell all over themselves killing this useful legislation. We’ll see all those who voted against the bill in the elections in 2011. Bye bye…