Rebel With a Cause

Paul Goldman

Teaching the Facts of Life

First graders get punished for not doing their homework. But the governor, his advisors and editorialists get to beat their breasts and praise themselves despite costing the state millions.


My son, overhearing me on the telephone urging people to do their homework on the Estate Tax issue, innocently asked: "Dad, if they don't do their lessons, will they get a bad mark on their report cards?"

It was a good question then, and even a better one now, given all the self-praise and posturing of those suddenly threatening to do "everything in their power" to promote a "shared sacrifice" to correct the fiscal bungling in Richmond. Belatedly, they have all remembered their repeated promise to make sure the poorest among us do not have to accept more "budget pain" and "pay more" while those with the most assets pay less and get new giveaways.

Having awoken from their political slumber, Democrats are now in passionate, unified opposition to the Virginia GOP's effort to give a handful of families an average $2.3 million Estate Tax break -- which would have totaled $130 million for only 1,786 families had the bill been in effect in 2002. Until Bacon's Rebellion put the issue in language that aroused these Rip Van Winkles to action, the GOP plan had sailed through the General Assembly with veto-proof margins.

Now they are agreed that a gubernatorial veto is necessary to prevent this "fiscally irresponsible" measure from giving this new tax break to a few while the overwhelming majority of other Virginians are asked to pay more in state fees and get less in state services.

Fittingly, my son asked his question while counting coins for his homework. I asked him this question: If someone reached into your piggy bank and gave two dimes and a penny to someone else, how much would be gone? He first said 19, which was close enough for government work, at least at the General Assembly. Then he said 21, with a big smile.


"That's my T-Man" I said, wondering whether I should call up John Bennett, Secretary of Finance or Bill Leighty, the governor's Chief of Staff, to volunteer my son's help in getting them to understand the Estate tax math.

But no, I thought, I've got to at least see if my son can handle some bigger numbers, just as Mr. Chichester and Mr. Callahan leave this nickel and dime stuff to aides and lobbyists. So I then asked him how much money his piggy bank would be short if they reached in and took two dimes, one nickel and six pennies? He thought for a while, not having all those six-figure state government aides and officials paid to help him get the right answer.

"That's too much money, Dad," he said, smartly taking his piggy bank to another room. "Dad," he said, "the game isn't funny anymore because I am losing all my money and now I won't be able to go to Chuckie Cheese."

"If they take it," he asked, "who's gonna make it up?"

The lad is only seven, so I hesitated to give him the facts of life. But I owed him the truth: "You will have to make it up yourself son," I told him. "Sorry to say, It's business as usual in Richmond."

Unfortunately, the Estate Tax fight isn't a game, nor is the apparent failure of so many to do their homework very funny.

Why did I pick the numbers 21 and 31? Because they equal 52, and when you add six zeroes, you get $52,000,000, a number that will be given a particular meaning as you continue to read on.

Unfortunately, as I have told people both publicly and privately, a veto on the GOP-authored estate tax bill, even if sustained, does not deliver on the high-sounding, yet empty words of those who oppose the raid on the state treasury. For sure, a veto is necessary to kill the GOP ploy to eliminate the state's estate tax outright. But it is not what the governor and others, based on their own rhetoric, should have been fighting for from the beginning.

Why? The reasons are well-known to everyone in Richmond. Virginia's tax code is "coupled" to the federal tax code, meaning any tax changes made in Washington automatically become part of the Virginia tax code. Thus, as the federal law phases in exemptions for estates, eventually reaching $3.5 million, the state tax code matches the exemption, thus reducing the state's estate tax at the same time.

A veto of the GOP estate-tax bill will not touch the escalating exemptions accompanying the change in federal law.

What is the amount of this fiscally irresponsible and inequitable state tax break that a veto will not prevent? You guessed it: The collective tax break over the next few years -- even assuming a successful gubernatorial veto -- will be at least $52 million in the short-term and over $200 million a budget cycle during the latter part of the term of the next governor. The actual figures could easily be millions higher.
I have not made up these figures, nor have I discovered them over this weekend. Rather, these facts and figures have been known to all the players in Richmond since the start of the 2003 General Assembly Session, indeed known by the Secretary of Finance and others for far longer. Anyone reading this article can get them in five minutes off the Internet.

Yet, to my knowledge, this coming fiscal hole and inequity has not truly bothered anyone in Richmond nor has it fueled the fighting spirit of the state's editorial writers.

Last year for example, the folks with the biggest assets in the Big Business community, along with the administration and others, went to the African-

American churches in Tidewater and other places telling people they had to vote to raise their sales tax for the good of the Commonwealth. The Virginian Pilot wrote several dozen editorials supporting the effort, saying those who would not raise their taxes
were greedy and displayed bad citizenship.

So, clearly, there is a will to raise people's taxes for at least bricks and mortar, especially by the Big Business community when it serves their

I have no problem with people fighting for what they believe -- higher taxes or lower taxes as the case may be -- and giving the public a chance to vote on such issues. For years, I have thought the Democrats made a terrible mistake in not passing Initiative and Referendum, feeling that they would eventually regret having not given the public a way to directly address the issues and proposed solutions.

Yet all the energy put into making the poor and middle class pay a higher sales tax for transportation is surely highlighted now when compared to the way these same editorialists, Big Business backers, key state legislators, and the Administration have acted in regard to the Estate Tax issue.

Passing a law to "decouple" the Virginia Estate Tax from the automatic effects of the federal estate tax legislation would not -- repeat, would not -- raise anyone's state taxes. Estate taxes would remain the same as they would have been but for the operation of the federal law and the "coupling" phenomena.

On the other hand, we cannot afford right now a huge, $52 million tax break for a handful of the Virginia's wealthiest families while we cut spending on the backs of the poor and middle class.

Where is the focused state coalition to stop a fiscally irresponsible attack on the state budget as there was to get the poor to pay higher taxes?

I can anticipate the comments from the usual chorus in Richmond: But Paul, when you were advising Doug Wilder, you were the one who was the strongest anti-tax guy up there.

True enough: I was the anti-tax guy, both in the Wilder campaign and the Warner campaigns. As I said in my Washington Post article advising Gov. Warner not to raise state taxes, the folks in Richmond who so bungled the state's finances cannot be trusted with any new money. They are proving it again this year.

But the Wilder Administration and the Democratic General Assembly did "decouple," on a temporary basis, from the federal tax code in one major instance when it was deemed necessary and fiscally prudent given the fiscal situation. Was it popular? Of course not. But it was one of those hard choices few actually have the guts to make.

Ninety-eight to 99 percent of all estates pay no tax. The growing size of the federal exemption will greatly reduce even that number, which in 2002 was only 1,786.

Let's take this last number for example. Based on the fact that this "increasing federal threshold" will reduce state revenues by upwards of an average of $10 million in the next two years, this means the average of these families still would get a tax break of around $5,000 each if all the governor vetoes the GOP bills and does nothing more.

Allow me to put this special tax break into perspective. A $5,000 tax break is greater than the state income tax liability of virtually every Virginia family whose gross income is $100,000 or less, indeed greater than that of many Virginia families whose gross income is $125,000, assuming they have substantial mortgage, local tax and family expenses.

Thanks to Jim Bacon and, the Estate Tax issue has now become a major one this year, as Mr. Bacon was the first to insist that the full facts -- on both sides -- be clearly and passionately presented so that Virginians could be educated on this issue.

But now the genie is out of the fiscal bottle. The Governor, to his credit, has said that he intends to try and amend the GOP plans that sailed through the General Assembly.

I have urged him to put together a statewide information campaign, so that the people will understand the issue in its fullest dimension.

Given the commentary of last week, it is clear such an information campaign must first start with the state's editorial writers and columnists, not to mention the General Assembly, and the business community which has such a fondness for taxing the poor to pay for its road projects.

Surely those who thought it was fair to ask the poor to pay more for roads and mass transit can understand how these citizens will feel when they find out that their representatives failed to fight an unprecedented tax break in the middle of one of the worst fiscal crises in the state's history.

Why have we reached last week of the General Assembly Session and these basic facts and consequences have still not been adequately explained to the people of Virginia?

Whether this General Assembly can be persuaded to do the right thing is something we will never know until they are forced to make a public choice. But unless the effort is made, the failure to act will be considered a watershed moment in Virginia politics in a few years.

This may be hard for people to understand now. But I can assure you it will be the case.


-- February 17, 2003

(c) Copyright. All rights reserved. Paul Goldman. 2003.


Bring Home the Bacon

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Paul Goldman, the Rebel With a Cause, was chief political strategist for the past two winning Democratic governors in Virginia and was credited with leading a "revolution in American politics" by The New York Times for his role in breaking America's 300-year-old color barrier in national politics.