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X68 RETAIL MERCHANTS TAX BESIDE THE FACT THAT VIRGINIA IS A HIGH RETAILER TAX STATES OTHER IMPORTANT POINTS MUST BE CONSIDERED: ~, THE RETAIL LICENSE TAX IS NOT READILY PASSED ON TO THE CONSUMER BUT MUST BE ABSORBED 8Y THE MERCHANT. WELL-KNOWN BRANDS OF MERCHANDISE CONSTITUTE A LARGE PROPORTION OF OUR SALES. COMPFTITIVELY~ IT IS NOT POSSIBLE TO INCREASE THE PRICE OF A NATIONALLY ADVERTISED SHIRTS FOR EXAMPIE~ -~--~ FROM $4.50 TO $4.60 TO MEET INCREASED TAXES - PARTICULARLY AS MUCH OF THIS MERCHANDISE HAS A NATIONALLY ADVERTISED PRfCE. THUS WE ARE NOT IN A POSITION COMPARABLE TO MANUFACTURERS WHO CAN GENERALLY PASS ALONG INCREASED COSTS BY RAISING THE PRICE OF THEIR PRODUCTS. SINCE WORLD WAR II INCREASED PRICES OF MANUFACTURED GOODS HAS BEEN A FAMILIAR STORY. Z. IN THE LAST TEN YEARS ALTHOUGH SALES HAVE GENERALLY BEEN INCREASING THE NET MERCHANDISING PROFITS IN RETAIL AMERICAN BUSINESS HAS DROPPED FROM 4,4~ OF SALES TO AROUND ~~o. IF A MERCHANT1S VOLUME IS $SOO,000, HIS NET MERCHANDISING PROFIT WOULD BE $5,000. IF THE RETAIL TAX IS INCREASED AS PROPOSED HE WILL PAY ABOUT $5OO MORE TAX THAN HE IS CURRENTLY PAYING. THIS IS A SIGNIFICANT PERCENTAGE OF HIS TOTAL PROFITS. IT IS EVEN MORE SIGNIFICANT WHEN YOU CONSIDER THAT THIS TAX IS LEVIED ON SALES WHICH HAVE BEEN INCREASING AT THE SAME TIME THAT THE RETAILERS PROFITS FROM THOSE SALES HAVE BEEN DECLINING. RECOMMENDATION CHARLOTTESVILLE~S TRIPLE Q BOND RATING REFLECTS THIS COMMUNITY~S PRESENT FINANCIALLY SOUND CONDITION. AS BUSINESSMEN WE HAVE A TREMENDOUS STAKE IN MAINTAINING THIS CONDITION IN THE FUTURE. YET IT IS THE FUTURE PROBLEM THAT CONCERNS US MOST. WITHOUT ADEQUATE ANALYSIS AND PLANNING OUR LOCAL TAX STRUCTURE COULD GROW LIKE TOPSY-PARTICULARLY IF THE PRESENT PATTERN IS FOLLOWED WHEN ApDITIONAL REVENUE IS NEEDED-- NAMELY SIMPLY LOOKING AT THE EXISTING TAXES COMPARING THEM AGAINST THE AVERAGE OF OTHER VIRGINIA CITIES AND MOVING THE RATES UP TO THAT AVERAGE POINT. WE BELIEVE THAT THIS IS NOT THE WAY A TRIPLE A COMMUNITY SHOULD FACE THE PROBLEM. THEREFORE BEFORE ANY CHANGES ARE MADE IN EXISTING TAX RATES WE STRONGLY RECOMMEND THAT THE COUNCIL MEET THE PROBLEM HEAD ON AND APPOINT A TAX STUDY GROUP TO ANALYZE CHARLOTTESVILLE~S TAX STRUCTURE AND TO DRAW UP GUIDELINES TO MEET THE CITY~S FUTURE REVENUE NEEDS. WE BELIEVE THAT THIS GROUP SHOULD BE COMPOSED OF REPRESENTATIVE INDIVIDUALS WHO COULD EXAMINE THE TAX IMPACT ON BEHALF OF THE PUBLIC IN GENERAL - PARTICULARLY SINCE THE PUBLIC - AS A WHOLE - WILL BENEFIT FROM THE SERVICES PAID FOR BY THE REVENUE RAISED. II. WE URGE THE COUNCIL TO GIVE THE TAX STUDY GROUP THE AUTHORITY TO EMPLOY EXPERTS TO COMPILE AND EVALUATE RELEVANT DATA AND TO CONSIDER FUTURE PROBLEMS. ~ FOR INSTANCE: ~~ WHAT WILL THE EFFECT OF ANNEXATION BE ON THE CITY~S SUPPLY AND DEMAND FOR REVENUEY Z) IS THE PRESENT TAX STRUCTURE CONDUCIVE TO THE LOCATION OF BUSINESSES WITHIN THE CITY CAN IT BE ALTERED TO ENCOURAGE NEW BUSINESSES? 3J HOW WOULD A STATE SALES TAX AFFECT LOCAL TAXATION