Minutes 04/15/1958 - Laserfiche WebLink

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Res ul ts of ~~ 1947 Study The present Martinsville ordinance was adopted after a detailed study of value added ratio data by staff members of the Bureau of Public Administration of the University of Virginia, acting as research staff for a citizen committee similar to the present one. The original work sheets of the Martinsville Tax study are no longer available. Some of the figures, however, were preserved in the records of the Bureau of Public Administration. Column 1 of Table I on page 4 records the ratio data collected for Martinsville in 1947, insofar as that data is still available. Column 2 shows the ratios of value added to gross receipts suggested by the 1947 Tax study staff for the purposes of determining the rates in the 1947 ordinance. It will be noted that there are some differences between the ratios actually found and those suggested as a basis for the rate structure. This stems in large part from the fact that the sample of tax returns filed by Martinsville businesses which was available to the Tax Stuctr staff in 1947 was small and in some cases the staff thought that it was wiser to rely upon figures obtained from larger samples taken in Richmond, in Norfolk, and from trade association data collected and published by the National Cash Register Company at about that time. In Column 3, the suggested ratios are converted into a rate formula in which the rate for retail merchants is assigned a value of 100 and other rates are expressed as percentages of the retail rate. This formula has, of course, nothing to do with the level of the rates. It is to be read as follOiTs: nrf the retail merchants rate is 100, then each other rate should be - wholesale merchants, 72; professional occupations, 360; contractors, 180; business service occupations, 100; personal service occupations, 200; rep&ir service occupations, 100; amusement businesses, 250; and manufacturers, 72". It vTill be noted that in some cases very conservative estimates of value added ratios ~ere used. The suggested rate index number of 72 for manufao- turers, for instance, is based upon a suggested estimate of value added ratio of 18.00, certainly below any realistic figure. Column 4 records the tax rates finally determined upon by the Hartins- ville city council in 1947, and column 5 expresses these rates as a formula in which the rate on retail merchants equals 100. A comparison betw.een the figures in column 3 and the cOITesponcling figures in column 5 shows that the city counc:Ll departed in several instances from the formula suggested by the Tax stuctr staff. The significant departures are in the following categories: wholesale merchants, professional occupations, contractors, and manufacturers. The departure in the rate applied to contractors is eas ily explained. The figure suggested by the Tax Study staff was 180, based upon an estimated value added ratio of 45.0. Reference to column 1 Sh~lS that this estimate was itself significantly larger than the ratios actually found in Martil~ville in 1947. In addition, the staff gave the figure for contractors with the caveat that it ..ras less satisfied with Hs accuracy than with the accuracy of arv of the other figures. Later studies of contractor ratios have proved that the judgment of the city council in this case was sound. (3)