The Thinker

Hold the presses! Virginia Republicans are raising taxes!

Things are tough in Richmond, Virginia. Our legislature is back for its annual attempt to have its cake and eat it too. Last year it papered over massive state budget problems. This year it has run out of creative ways to keep basic state services going and not raise taxes. Needless to say for our Republican legislature this has involved a lot of wailing and gnashing of teeth.

True to form for the first few weeks our Republican legislature made brave promises that it would not raise taxes and parroted the usual silly assertions that the state government was just spending too much. Our governor Mark Warner, after campaigning on a platform of no new taxes, submitted his plan to address our state’s serious revenue deficiencies. It said that yep it looks like we really need to raise taxes folks but let’s call it rewriting the tax code instead of a tax increase. In the legislature it was, of course, declared immediately dead on arrival. On Monday Governor Warner conceded as much. But that still leaves that pesky little problem of how to balance our state budget (required by law) and not cut funding further for schools, transportation, the prisons and all those other essential services.

So how did the Commonwealth get into this mess? There is no denying the economic slowdown affected Virginia as well as virtually every other state out there. But it is more than that. During the 1990s Virginia, like many states, lived in flush times. Our technology industry in particular was going gangbusters. The area where I live in Northern Virginia (Fairfax County) attracted some of the very best and brightest of the software industry, including companies like AOL. We also had innumerable technology companies providing services to the federal government, like SAIC and AMS. While they were raking in the profits the state got its share. This meant citizens’ tax rates could be kept about where they were. All was right: we could keep spending more without changing the sales or income tax rates. Partially as a result the Republicans took over both houses of the state legislature.

We also elected James S. Gilmore as our governor back in 1998. The Reagan-like Republican Gilmore rode into office promising to get rid of the most despised tax in Virginia: the car tax. Counties are allowed to tax personal property in our state. However, the car tax money was critical to the counties. It was used for minor things like funding the schools. Gilmore succeeded in keeping the first $20,000 of the assessed value of the car from being taxed. The state reimbursed counties for the lost revenue. And all was right until the recession started. At that point it became politically untenable for the State to stop subsidizing the counties for this lost revenue. So it became a huge new liability for the State it couldn’t politically undo.

The State became caught between the rock and a hard place. One solution could have been to reinstate the car tax. However, the voters would not stand for it. So this new state liability became politically impossible to remove. Instead the legislature invoked the usual one time accounting tricks while making cuts to transportation, education and public safety.

This year there the choices become extremely painful. The legislature now has to figure out whether it will increase taxes or cut deeply into essential state services. Will it lay off public school teachers? Make civil servants go another year without a cost of living raise, or actually reduce their salaries? (It already laid off thousands of civil servants.) Will it in effect continue to raise taxes by shifting the burden to universities, who have to make up the difference in huge tuition increases?

Former Governor Gilmore is of course appalled that his fellow Republicans would even consider raising a tax. Yes, the same governor whose reckless overspending and tax cutting got us into this situation is castigating Mark Warner for his proposal to increase taxes!

Slowly, and with the greatest reluctance the legislature is considering (gasp) tax increases. The straw that broke the camel’s back seems to have been various reports that the state’s excellent credit rating was about to take a tumble. That wouldn’t look good. It would prove our legislature was full of incompetent boobs who could not manage money. If Moody’s decides Virginia is being run by a bunch of flim flam artists, our costs of borrowing go up or maybe go away altogether. We might even end up looking like California, which is going through its own fiscal shenanigans and has already had its credit rating lowered.

I’ve been a resident of Virginia for 20 years. I was not drawn here because taxes were a bit lower than they were in Maryland. I just wanted to live in Reston. But one aspect of Virginia government I did admire somewhat was that the state had a reputation for living inside its means. It knows how to pinch a penny. But it’s clear that any waste and bloat that did exist in Virginia government is long gone. Even the silly Center for Innovative Technology, a state funded high tech consortium, has largely lost its state funding as revenues sank. But no more. Our credit rating is in jeopardy.

Virginia Republicans are raising taxes. Who would have thunk? Looking for those to absorb the tax increases, businesses have become the primary targets. I guess it’s because businesses don’t vote. The House plan calls for $520M in tax increases. The Senate plan, proposed by a much more sober State Senator John Chichister, calls for $1.8B in tax increases. Governor Warner seems to favor the Senate approach. It will be interesting to see what actually passes and even more interesting to see how the state Republicans spin their tax increases.

Meanwhile rest assured our legislature is working on things that really matter. Noting that gays are being married in truckloads in San Francisco, it is reaffirming that it will have none of that same sex gay marriage crap here in Virginia. It is also working hard to restrict abortion rights. One proposal would make it unlawful for university health clinics to provide over the counter morning-after birth control pills.

But at the same time two other curious bills are going through the legislature. HB1006 will allow companies to offer group insurance benefits to gay partners who live together. This is especially curious since we still have sodomy laws the legislature refused to repeal even though they were invalidated by a recent U.S. Supreme Court decision. In addition HB187 was passed that no longer restricts state mortgage loans only to those who are married or are blood relatives. It remains to be seen if our state senate will go along. It is also unclear why we are getting a couple progressive bills through the legislature while being obnoxiously conservative on other bills. But maybe, just maybe this is a small sign of progress. If Virginia Republicans can actually vote to raise taxes anything is now possible in my state again.

 

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