Taxing Times in Virginia

Taxing Times in Virginia

March 1, 2002

So many lousy ideas were streaming out of the Virginia legislature in Richmond these past two months that it was tough to keep track of them all. In recent weeks the General Assembly schemed to cancel the car tax repeal, raise the gasoline tax, and raise the sales tax. The state Senate bounced around the idea of raising the state income tax in northern Virginia to pay for more roads and schools. What’s worst of all is that many of these lame-brained ideas were coming from the supposedly anti-tax Republicans.

These pro-tax RINOs (Republicans in Name Only) were being cheered on by big business groups, most notably the Virginia Business Council and the Virginia Chamber of Commerce. For months on end northern Virginia business leaders have been beating Republican legislators over the head demanding higher taxes to keep the commonwealth prosperous. That kind of thinking puts the Virginia business community slightly to the left of Ted Kennedy on the ideological spectrum.

It’s a sad and strange state of political affairs in Virginia when the new Democratic governor Mark Warner can largely sit on the sidelines and watch as the big spending Senate Republicans hang themselves with their pro-tax votes.

What the political class fails to appreciate is that lots of Virginians (like me) moved to the commonwealth from Washington or Maryland, to flee high taxes. Now this new, expanded Republican majority in Richmond debates raising every tax and fee they can get their paws on so the state can be more like the high tax areas we just escaped.

Except for Speaker Vance Wilkins and a conservative contingent in the House of Delegates, no one in Richmond wants to discuss budget control, fiscal restraint, and belt tightening. This, despite the fact that the general fund portion of the Virginia state budget has almost exactly doubled in size since 1990-from $5.7 billion to $11.7 billion. In fact, over the past decade Richmond has been on the ninth fastest spending binge among the fifty states.

Now it is true that Virginia has experienced population growth since the early 1990s. But even if we adjust for the increased number of families that now reside in Virginia, the state’s budget has risen at twice the rate of population growth plus inflation since 1992. Only ten states have had faster expenditure growth.

What if Virginia had held the rate of growth of tax revenues to the rate of inflation plus population growth over the past decade? How much would taxpayers be saving today if that reasonable guidepost been adopted? The answer, according to the U.S. Census Bureau data on state finances, is that the average Virginia family of four pays $1,700 a year more today than it would if those taxes had not outpaced population and inflation.

The tax-lobby in Richmond insists that taxes must be raised to cover the costs of needed roads and schools. We are told the funding shortfall is expected to approach $100 billion over the next twenty years. But as a Virginia Institute for Public Policy study shows, Virginia’s school funding has risen fifty percent since 1992 and transportation expenditures have soared by well over sixty percent. This is a spending shortfall?

It’s instructive to compare the fiscal track record of Virginia versus Maryland. Virginians like to snub their noses at the taxing and spending ways of their traditionally more liberal northern neighbor. These days it would seem there’s a lot more economic common sense in Annapolis than Richmond. In recent years Maryland has cut its income tax. Virginia hasn’t. Meanwhile, since 1992 the Virginia budget has grown by eighty percent versus fifty-nine percent for Maryland.

If the Virginia Chamber of Commerce and the Virginia Business Council have their way, it won’t be long before businesses and families are packing their U-Hauls to move out of Virginia for the more tax friendly policies of Maryland.

The legislators in Richmond must understand that they can’t tax Virginia out of recession. In fact in the economic downturn of the early 1990s, it was precisely the states that raised taxes the most-California, Connecticut, New Jersey, and New York-that dug themselves into the deepest budget holes and had the most job losses. The states that kept their tax burdens affordable came out of that recession swimmingly.

Virginia used to be a state that had tolerable taxes and good public services. If the business groups and politicians have their way, the state tourism ad campaign may need to be changed. Once upon a time, Virginia was for lovers. Now Virginia is for taxers.