VA Budget - A Taxing Crisis

VA Budget – A Taxing Crisis

Commentary by Sanford D. Horn

April 7, 2004

In responding to an e-mailed survey from a member of the Virginia House of Delegates, my thoughts turned to the quandary facing that body, and the Senate and the Governor – that of the budget. The survey was riddled with loaded questions apparently designed to make someone feel good about a tax increase and assuage a conflicted conscience about raising them.

The problem is not the need to raise taxes versus the ability to provide services to the people. The problem is the ability to better spend the dollars that are already being extracted by Richmond. The tax structure, as Del. Thomas Davis Rust (R-Fairfax) has said many times before, is the problem. We are no longer an agrarian economy in this Commonwealth. The taxing structure needs an overhaul. Pork barrel projects need to be stripped away and revenues coming to Richmond need to be allocated in a more responsible fashion. 

Should the tax on food in supermarkets be completely eliminated, people would spend that amount plus more on food when grocery shopping over the course of a year. That additional spending would increase the coffers of the supermarket chains as well as the food production companies, etc. With the increased revenues of those companies, they in turn would pay more dollars in taxes, but not a higher rate of taxes. Perhaps there would be a zero sum gain, but chances are, the revenue of the Commonwealth would increase. Put more money in individuals' pockets, they will be more inclined to spend it, thus raising revenues of the companies producing the goods and services used by Virginia residents and in turn raising the revenue of the Commonwealth. Corporate Virginia would pay more in tax dollars without a tax percentage increase and they would still reap the benefits of tax reductions to individual consumers because they would experience a spike in their revenues.

The same would be true by eliminating the numerous tax exemptions enjoyed by many corporations in Virginia. There are more consumers than there are corporations. By lowering the taxes of individual Virginians they will ultimately spend more, thus raising the revenues of the corporations who lost those tax exemptions. Again, they would pay more in tax dollars but not due to a tax rate increase. Corporate Virginia's only tax increase would be the elimination of the exemptions.

The key is the responsibility the members of the Virginia House and Senate are taxed with. They have been elected to represent the citizenry. They should not go to the citizenry and ask them to do their work for them via potential referenda. Any member of the legislature who thinks referenda are the answer should be voted out of office for not doing their job. Hard decisions must be made regarding where the money must go and who will pay it and how it will be paid. It's time the legislature became accountable for the tasks they were hired/elected to do. If they can't handle that responsibility, they should step aside for someone willing to do just that.

Many of the proposals in House Bill 5018 are sound, but some are questionable. Elimination of the estate tax is a wise move, one that the federal government ought to emulate. I've already expressed my support for the reduction of the tax on food, but would like to see it eliminated completely. My home state of NJ neither taxes food nor clothing for example. Raising the personal exemptions is also a good move as it will put more money back where it belongs – in the hands of those who send it to Richmond in the first place. Raising the filing threshold is also a good move.

Playing with the age deduction, on the other hand, with a means test, gets tricky. Who determines such means? Upon what will it be based? Net worth? Will that include land and property? Will that be based solely upon income? Will it be weighted to give a greater deduction to people living in more costly parts of the Commonwealth such as Alexandria and Fairfax County while giving a smaller deduction to those residing in the southwest corner of Virginia? Certainly there will be a legislative impasse on this issue for the same reason there are regional squabbles over how much money goes from Northern Virginia to Richmond for the purpose of funding less affluent portions of Virginia. A member of the legislature from the southwest supporting such a plan would be voted out in a country minute as would a member from Northern Virginia voting against such a measure, thus the standoff.

Raising the sales tax half a cent is only beneficial if the money stays where it is raised – and that needs to be guaranteed. If not, forget it. Raising the cigarette tax is only beneficial if all that tax revenue is earmarked for health-related concerns. While not a smoker, I object to raising the cigarette tax so prohibitively in order to coerce people from using a legal product. Tobacco growers and cigarette companies have the legal right to exist and make livings. Such a tax is regressive and will only hurt the poor, driving a deeper rift between the alleged haves and have nots. A modest increase in the cigarette tax is fine, again only if earmarked for health-related concerns.

Personal and legislative responsibility remains the keys to solving this budgetary crisis. Eliminate the boondoggles, pork barrel projects and restructuring the taxing system are the first paths to take down this long, twisted road toward continued solvency. Those who cannot handle the tasks at hand should step aside for those willing to make the hard decisions.

Sanford D. Horn is a writer and political consultant living in Alexandria. He is also a member of the Alexandria Public Records Advisory Commission.