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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
interests.
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 baconsrebellion.com, 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.
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