Category Archives: Taxes

Time for a Fairfax County Salary Freeze

by Arthur Purves

Local government compensation is better than private sector.

On April 30 the Fairfax County Board of Supervisors will vote on next year’s (FY2025) tax increase. The supervisors have advertised a 7% increase in real estate and car taxes to help pay for $360 million in raises for 38,000 school and county employees.

School raises are 6% and county raises range from 4% to 10%. By comparison, the county says that inflation is 2.5%. For next year, the Fairfax County Board of Supervisors, under Chairman Jeff McKay, is proposing a 7.1% or $618 tax increase for the typical residential household. This is the second largest tax hike in ten years, exceeded only by last year’s 8.9% increase.

Next year’s tax hike is made up of an average 6.5% or $531 increase in the combined real estate and stormwater tax, both of which are based on household assessments, plus a 16% or $87 increase in the car tax.

This continues the supervisors’ quarter-of-a century habit of increasing residential taxes three times faster than household income. They are advertising a 4-cent increase in the real estate tax rate, from $1.13 to $1.17 (includes the 3-cent stormwater tax), on top of a nearly 3% average increase in residential assessments.

Unless they hear from homeowners, the supervisors will probably adopt a rate of $1.16 when they finalize the budget on April 30, in hopes that homeowners will be relieved that the rate increased 3 cents instead of 4 cents. Continue reading

Call the Governor a Spoiled Brat? That’ll Work!

Not a visual that communicates the Democrats are leading an army in this fight. It screams loneliness.

By Steve Haner

A senior Democrat on the Senate Finance Committee just called the Governor of Virginia a spoiled brat, which of course became a headline. Is everybody getting the nonsense out of their systems? It is time for the grown-ups to intervene or we will be stuck in a stupid loop until July.

The state budget as it passed a few weeks ago will not stand. Governor Glenn Youngkin (R) will either impose line-item vetoes that drastically reduce the available revenue, or he will veto the entire $188 billion document. He has sufficient votes behind him to sustain those vetoes.

That Governor Youngkin would never accept an expansion of the sales tax to digital items on its own, without compensating tax reductions of some sort, has been obvious throughout this process. Democrats knew that. Expanding the tax to cover a host of business-to-business transactions, as well, was an intentional act of political arson by the Democrats. They knew all along it would never stand. They are begging for a veto for reasons hard to fathom.

Think back just one year, just one single year. Can anybody imagine Fairfax Democrats Richard Saslaw or Janet Howell building their budget on a tax proposal that has the Northern Virginia technology industry on the warpath? Can you see them proudly touting an effort to, as I put it earlier, kill the digital goose for its golden egg? These are not only not our fathers’ Democrats; these are not 2023’s Democrats. Continue reading

Complex Digital Sales Tax Worthy of Veto

By Steve Haner

Pick any member of the General Assembly at random, stop them in the grocery store for a chat, and quiz them about the digital sales tax they approved a week ago Saturday.  It will quickly become clear that most had no idea what they were voting for when they approved it.

What will the tax add to the cost of your Amazon Prime or Netflix? (For most, 6-7%.) Will the tax be collected on both the monthly fee and on anything extra you download (Yes) Will it add to the cost of preparing your tax to file online, your annual lease for Microsoft programs on your laptop or your security system program? (Yes, most digitally-based services will all be taxable to individuals, and many of them will be taxable to businesses. If you are doing something on a computer or phone that costs money, it is likely to become taxable.) 

Even for a business, if some software package its employees use includes a combination of online services, will it owe tax on the entire package? (Yes, unless the vendor is willing to break apart the bill, which many may refuse to do. That is because of the new language about taxing bundled services.)  If an out of state vendor does not add tax to the invoice, taxpayers will be required to calculate and pay it as a use tax, with auditors ready to pounce if they don’t.   

Think of engineering, law, banking, or medicine.  So many of their processes are now controlled by expensive software, most of which is about to be 6-7% more expensive.  At the shipyard in Newport News, paper blueprints and printed job instructions were replaced with tablets and digital design programs years ago.   Continue reading

Jefferson Institute Lists Bills Youngkin Should Veto

By Derrick Max

We have reached sine die of the 2024 General Assembly legislative session. During this session, over a thousand individual bills and a nearly 500-page biennial budget were sent to the Governor. All of this must be reviewed and acted upon by Governor Glenn Youngkin (R) before the April 17 reconvened session.

There may be hundreds of bills on the Governor’s desk worthy of his veto. Additionally, Democrats inserted partisan policy decisions within the budget in such a way that the Governor may need to veto it in its entirety. As Senator Creigh Deeds (D-Charlottesville) noted in his end-of-session constituent letter: “The budget includes items the Governor does not support, and some of those may be difficult for the Governor to veto because they are woven into the fabric of the budget itself. Speculation is rampant that he may opt to veto the budget, which would set us up for another prolonged budget debate.”

Governor Youngkin should not hesitate to use his veto pen liberally, including on the budget. As former Governor Terry McAuliffe (D) said, “The veto is not a decision I take lightly, but it is a necessary tool to prevent harmful legislation from becoming law. I will continue to stand up for the values and priorities of the people of Virginia by exercising this authority judiciously.” Governor McAuliffe had the highest number of vetoes in recent years when he faced Republican majorities in both chambers, vetoing 49 bills in 2017 alone and 120 during his entire term. Continue reading

The Sausage Factory Taxes the Digital Economy

By Steve Haner

The Virginia General Assembly has now jumped into the brave new world of taxing the digital economy, but the sales tax provisions it adopted in the budget conference report Saturday are not the same ones that appeared in earlier budget versions. The cabal of tax raisers in the secret final negotiation got creative.    Continue reading

Killing the Digital Goose for Its Golden Egg

Jared Walczak of the Tax Foundation

By Steve Haner

The last time the General Assembly made a similar mistake with the Virginia tax code was 20 years ago. It was 2004, and the complaints that business was not “paying its fair share” came from Republicans in the House. They introduced and quickly pushed through a bill that stripped sales tax exemptions from multiple categories of business. Sound familiar?

Twenty years later the only thing that has changed is that the bad idea is now coming from Senate Democrats. The anti-business rhetoric sounds the same. The sales or use taxes of up to 6-7% they seek to impose on business-to-business digital transactions (goods and services) will reach into every Virginia company, large and small. It will simply be passed along in higher prices. The only winners are their out-of-state competitors who have no such taxes in their states. Continue reading

RVA Meals Tax: Practically Poetic Injustice

by Jon Baliles

As noted, two weeks ago City Council approved the change to city code to make sure the city’s Finance Department only applies meals tax payments to the month for which the invoice is submitted. So, no more of the shady practice that had been applying a portion of say, May’s tax payment, to an outstanding balance from April’s bill. The reason that’s a bad idea is that the city could put any account in arrears but the business owner never knew because the city had a practice of not informing the business they were in arrears, which led to the crazy snowballing of interest and penalties that resulted in bills of $37,000, $50,000, and $68,000.

Samuel Veney, the owner of Philly Vegan, who was told by the city he owed $37,000 in penalties and interest, was eloquent and forceful at the City Council podium on February 12th. He implored Council not only to listen, but to hear what he way saying — he wanted to make sure they heard how he was missing time with his children and spending too much time dealing with the city’s screw-ups instead of working at his business. Said Veney:

What we are saying to y’all right now is to take the opportunity to make change happen. It shouldn’t have gotten this far and now that it has you actually have the opportunity to actually make change happen in a better way for our city. Continue reading

A Veto-Proof Local Tax Hike Nearly Approved

Virginia sales tax rates: Light blue, 5.3%, green, 6%, dark blue, 6.3% and yellow 7%. All but the localities in dark blue would be allowed to add another 1% under this pending legislation. Click for larger view.

By Steve Haner

A bill likely to produce $1.6 billion or more in local sales tax increases is moving through the General Assembly with enough bipartisan votes to block any veto from the Governor, but differences remain between the House of Delegates and Senate versions. Continue reading

Democrats Lose Concerns About Taxing the Poor

Econ 101 Quiz. Virginia Democrats are poised to raise the sales tax 1% in most localities, add digital products to the taxed services, and create a new payroll tax. How will those changes impact that chart? Click for larger view.

By Steve Haner

A piece of Republican Governor Glenn Youngkin’s tax package has survived after all, but only the part that increases the sales tax base to collect about $1 billion or so more per year from citizens. Democrats who recently complained that sales tax increases were unfair to the poor are suddenly embracing them. 

On Sunday, both the Virginia Senate and the House of Delegates budget committees approved Youngkin’s budget language to impose the sales tax on a host of digital products and services, adding 6% or more to the prices of downloads, streaming services, and online data storage. The full range of newly taxed transactions is not yet clear. 

The Senate then increased the gain to the treasury by making sure the new taxes will also cover business-to-business transactions, something the governor sought to exempt and something which is just passed along in higher prices.  

The risk of including that tax policy initiative inside Youngkin’s introduced budget bill was obvious from the start, and General Assembly Democrats have now pounced on the opportunity to capture that revenue. The tax increase is now wrapped in with all the state spending for two years, a hard bill to vote against.   Continue reading

Floyd Judge Ponders Order to Return RGGI Tax

The states in the Regional Greenhouse Gas Initiative tax compact before Virginia withdrew.

By Steve Haner

A circuit court judge in Floyd County may soon order Virginia to rejoin the Regional Greenhouse Gas Initiative and to reimpose the related carbon tax on Virginia’s electricity consumers.

Judge Kenneth “Mike” Fleenor Jr. ruled earlier this month that a suit seeking reinstatement of RGGI could continue and held a hearing on February 5 on the question of “immediate relief.”  The plaintiff, a group of energy efficiency and insulation contractors using the RGGI tax dollars for their programs, has claimed it will suffer immediate and irreparable harm unless Virginia returns to collecting a carbon tax on coal and natural gas used by utilities. Continue reading

Analog Tax Policy is Harmful in a Digital World

By Chris Braunlich

To many, testifying before a government committee conjures visions of the drama surrounding the McCarthy, Watergate, or Zuckerberg hearings.

In Virginia, not so much.  Faced with processing more than 2,600 bills in 60 days, the legislature conducts hearings that are often more of a kabuki dance, while backstage choreographers figure out the next steps.  Speakers are frequently limited to one minute and sometimes committee chairs simply ask the roomful of citizen and professional lobbyists to stand in support or opposition to a bill.  It is rarely deep and incisive content.

But these hearings are ideal opportunities to test the waters, grab a headline, position your bill for the future, ask a question directly of a bill’s sponsor, or determine where your adversaries are coming from. Continue reading

The Case for an RVA Meals Tax Amnesty

Richmond City Hall

by Jon Baliles

Today we are posting a special edition featuring an email from former restaurateur Brad Hemp that he recently sent to City Council about the meals tax fiasco you have probably heard about as a result of seven years of neglect at City Hall. The Mayor raised the meals tax in 2018 to help build new schools and pledged in return he would also help the restaurants. He raised the tax, and three schools were built, but he forgot about helping the restaurants.

Now, here we are, years later, and the only thing coming from City Hall are vacillating and daily changes and pledges to fix the problem on a “case-by-case” basis (in a vain attempt to get the media stories to stop). As someone who lived and breathed the restaurant business (and could teach the Mayor and Council a few things about it), Hemp has some suggestions to fix the mess. The question is, will the Mayor and City Council finally listen and do something?

RVA 5×5 — PREFACE
The best government is almost always the one that listens. It makes it easier for people to enjoy their lives, better their neighborhoods, open or run a business, and have fun. The worst government is almost aways one that pretends to know everything and thus ignores listening to or helping the people by doing things like, just as an example, forcing through a second casino referendum right after the first one lost. Another way to demonstrate bad government is to find straw-man excuses for erroneous billing of residents for personal property, real estate and water, and misapplying payments of meals taxes for restaurants and never notifying anyone when a bill is late while interest and penalties skyrocket. The “leaders” at City Hall say it’s the fault of state code, or the postal service, or bad technology, or the current lunar cycle. Don’t look inward to see if it’s an internal problem, blame it on everyone and everything else. Continue reading

Only Tax Increases Still Pending at Assembly

Gov. Glenn Youngkin

By Steve Haner

Governor Glenn Youngkin’s package of proposed tax changes is now stalled in both the Virginia Senate and the House of Delegates. A House subcommittee spiked it Feb. 5 and then dashed other bills imposing major tax increases on higher income Virginians. A full Senate committee refused his bill on Feb. 6.

Of course, anything is possible until the General Assembly adjourns in March, but it seems only two major tax increase proposals are still viable in the 2024 Assembly.  

The first would allow all Virginia cities and counties to add an additional 1% to the sales and use tax within their borders for school spending, if a local referendum approves it. Current law has allowed that in eight counties and one city but this bill would expand that to the entire state. It is advancing in both chambers. 

The second, not usually discussed as a tax hike, is the proposal for a new state trust fund to provide weekly payments to employees taking family or medical leave from work. The bill calls for a payroll tax to fund the benefits but does not specify a tax rate or indicate just how much of an employee’s wage would be taxed. The Virginia Employment Commission based its fiscal estimates on a tax of just under 1%.  

Bills creating this new state-paid family and medical leave benefit program are now in the budget committees of both chambers, and they have until February 18 to reveal their budget amendments. This program could easily become a $1-2 billion annual entitlement. The underlying federal Family and Medical Leave Act (FMLA) provides no income replacement, just up to 12 weeks of job protection for covered absences. Continue reading

Mea Culpa, Bills Targeting UDC Should Fail

Is the historical homestead of the Lees of Virginia, Stratford Hall, being stripped of its tax exemptions just because of its connection to one Lee in particular?

By Steve  Haner

Racial animus and revenge are always bad policies. It is now very clear those are the motivations for the bills advancing to strip tax exemptions from legitimate historical and charitable institutions, simply because of connections to the Southern Confederacy. They should die.

The beeping sound you hear is me backing up my truck to prepare for a 180- degree turn. My initial reaction to House Bill 568 was to not really care, but that was based on a cursory reading of the fiscal impact statement. I also forgot the lessons of 40 years of watching the sausage factory and failed to read the bill to the end. Continue reading

Serious Tax Reform Addressing a Serious Problem

Chris Braunlich

By Chris Braunlich

The American linguist Yogi Berra once said of a New York City restaurant: “Nobody goes there anymore.  It’s too crowded.”

Overcrowding, however, isn’t what motivates a move to a state (or from a state).  Those decisions are inspired by robust economic activity, jobs for residents, and a pathway for each generation to do better than their parents did.  People move for a job, for higher pay, for lower cost of living, or for a better education. Continue reading