In this report the Revenue Resources and Economic Study Commission presents its findings and recommendations based on the many state and local fiscal issues that it has studied in the last two years. The first section provides a fiscal backdrop for state and local governments in the Commonwealth and their fiscal outlook for the remainder of the 1970's.

The second section is an examination of state fiscal issues and is divided into three parts. Tax equity issues are discussed first. An overriding reason for the recommendations made on the first three issues is the furtherance of Virginia's conformity to the federal income tax laws begun in 1972. The second part reviews possible tax sources that could provide additional revenues to the Commonwealth if necessary. The commission has assigned no priority to the alternative revenue sources and only lists them for informational purposes. The last part deals with issues related to the question of the possible exemption of food products for home consumption &.nd nonprescription drugs from the sales tax base. Because of the interest in this issue, the commission feels that a rigorous examination is warranted.

The third section examines local fiscal issues, and its format is identical to that of the previous one. The first part is devoted to issues. whose major consideration is tax equity and includes a report on the effects of the Wetlands Control Act. The second part provides possible alternative revenue sources for local governments. The commission does not specifically recommend any of these revenue sources but again presents them on an informational basis. Finally, there is a brief discussion of state-local funding for elementary-secondary education in the Common wealth.

The fourth section concerns the property tax in Virginia. The commission has worked with the Governor's Advisory Committee for Property Tax Reform in studying the property tax but has decided to defer its final statement on the issues in this area until the Governor's Advisory Committee makes its recommendations. The commission does have two preliminary recommendations: (1) that a service charge should be imposed on all tax exempt property except that owned by the federal government and (2) that the state government should fund any system of property tax relief for the elderly.

The fifth section enumerates the issues that the commission feels warrant further study. Largely because of the number of issues that require further examination, the commission recommends that the Revenue Resources and Economic Study Commission be made a permanent body. The final section presents materials relating to the formation, organization, and work of the commission.

There are three appendixes. The first one provides the legislation proposed by the commission (Appendix A), the second one has an analysis of the administrative problems of exempting food products from the sales tax base (Appendix B), and the third one lists the alternative forms of property tax relief used by the states (Appendix C).