Estimado Jefe!
Usted nunca debe salir de la ciudad, señor! Ahora que usted está ausente, la revolución comienza! Amados lectores de ya no ver los artículos que glorifican a los ricos y privilegiados. Vamos a ayudar a la tierra y los pobres y redistribuir los fondos de cobertura. ¡Viva la Revolución!
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Tagged goozeviews
A fascinating new study by the Tax Foundation and KPMG digs deeper than the usual analysis that ranks states by business tax burden. This report, “Local Matters: A Comparative Analysis on State Tax Costs on Business,” recognizes that tax rates vary depending upon the type of business. Thus, while Virginia ranks 11th best among all the states for its taxes on mature firms, it ranks a humble 38th for taxes on new firms.
And that, my friends, goes a long way to explaining the conundrum I have frequently posed: Why does Virginia, especially outside of Northern Virginia, have so few fast-growth small and midsized companies? It’s the tax rate, stupid.
Here’s a breakdown if how Virginia ranks by sub-classifications:
Mature corporate headquarters — 9th
Mature R&D facility — 28th
Mature retail store — 7th
Mature call center — 15th
Mature distribution center — 10th
Mature capital-intensive manufacturing — 28th
Mature labor-intensive manufacturing — 8th
New corporate headquarters — 28th
New R&D facility — 39th
New retail store — 19th
New call center — 25th
New distribution center — 28th
New capital-intensive manufacturing — 49th
New labor-intensive manufacturing — 44th
You get what you tax lightly and drive away what you tax punitively. We want more start-ups, more fast-growth enterprises, more R&D and more advanced manufacturing. And what do we tax the heaviest? Those very same categories of business. Does it look to you like Virginia’s tax code serves the future… or interests of the corporate status quo?
Bacon’s Rebellion — asking the questions no one else asks.
– JAB
by James A. Bacon
On May 27, 2010, Governor Bob McDonnell announced that Yorktown-based Orion Air Group, “one of the world’s leading operators of business aircraft,” would invest $4 million to consolidate its operations in Newport News. The project would create 51 new jobs within the next 12 months with an average salary of $81,569. According to the press release: “The Virginia Economic Development Partnership worked with the City of Newport News, the Hampton Roads Economic Development Alliance and the Peninsula Airport Commission to secure the project for Virginia.”
In the 2011 General Assembly session, Senators Tommy Norment, R-Williamsburg, and John Miller, D-Newport News, co-sponsored SB 1188, a bill that would create an aircraft sales and use tax exemption for companies that (a) were headquartered in Virginia, (b) invested at least $4 million, (c) created at least 50 new jobs in the state that paid 150% or more of the prevailing wage, and (e) entered into a Memorandum of Agreement with the Virginia Economic Development Partnership (VEDP).
The bill passed the Senate comfortably by a 31 to 7 margin, passed the House and was signed into law.
It’s hard to avoid the conclusion that the tax exemption was carefully tailored to benefit Orion Air Group and none of its competitors.
The tax break was significant. According to an analysis by Judy Lin Bristow and Matthew C. Marshall with the Williams Mullen law firm, Virginia normally imposes a 2% tax on the lease, charter and retail sale of aircraft within the state. The tax, they write, is ”a costly expense for businesses that maintain or relocate their aircraft fleets in Virginia. For example, relocating a $40 million aircraft to Virginia has meant a 2% or $800,000 tax. ”
A tax break of that magnitude would confer upon Orion a major competitive advantage over the dozens of other aircraft charter, leasing and management companies in the state.
Mike Mickel, owner of Dominion Aviation Services in Richmond and a friend of mine, tells me the legislation really ticks him off. “This company [claims] they will be investing $4M and hiring 50 employees, while companies like mine, that have been investing tens of millions and have consistently had hundreds on the payroll for over 25 years still have to pay the tax! In 2011, new aircraft purchased for my fleet alone paid over $360K in sales and use tax.”
For that kind of money, Mickel could have worked the political system to get a similar exemption for himself and come out way ahead.
According to the Virginian-Pilot, Orion and its CEO Scott Terry has donated $3,500 to Miller, $3,000 to Norment, and $3,000 to former Del. Glen Oder, R-Newport News. Additionally, the company hired Miller as its director of community relations to oversee the company’s charitable giving and volunteer efforts.
That’s all old news to Peninsula residents. Miller’s acceptance of the position became a re-election campaign issue last fall. Republicans accused him of “trading tax breaks for a job and campaign cash” (as opposed to trading tax breaks for just campaign cash like the Republican bill sponsors did). But the story is back in the news because it appears that federal investigators are asking questions about the lobbying effort behind the legislation. Mike Wade, a lobbyist and Republican activist, told the Virginian-Pilot that he had been interviewed twice recently by Federal Bureau of Investigation agents who were trying to ascertain if the law was broken.
Regardless of whether laws were broken, the whole thing stinks. It’s another example of rent-seeking businesses corrupting Virginia’s political process and of politicians of both parties allowing themselves to be corrupted. How is politics in Virginia different than politics in Washington? The sums of money are smaller, that’s all. How are Republicans different from Democrats? When it comes to ethics, there is no discernible difference. Well, maybe there is one difference. Republicans purport to support free enterprise and a level playing field for business while Democrats make no bones about picking winners and losers. What a laugh. I guess that makes Republicans hypocrites as well.
By Peter Galuszka
There must be considerable gnashing of teeth in the Governor’s Mansion. Robert F. McDonnell had been working so hard to distance himself from his social conservative past, notably that nettlesome and Neanderthal anti-gay and anti-female graduate thesis.
He had worked hard to remake himself as a reasonable moderate, thus setting himself up for the Big Time, namely a vice presidential slot. Up to now, things had been looking good. True, his plans to privatize state liquor stores and erect offshore oil platforms have gone nowhere, but McDonnell has enjoyed strong popularity ratings and has received a fair number of invites on national TV talk shows.
This Republican-dominated General Assembly, however, is helping destroy a lot of his hard work. Virginia is getting negative national attention for such mindless, hard right policies such as lifting sales restrictions on handguns and forcing women seeking a legal abortion to pay for a trans-vaginal ultrasound test. Legislators have slapped gay couples across their cheeks by making it harder for them to adopt children. ”Foreign” looking people must go through citizenship checks if they are stopped by police who don’t who don’t have the time, money or will to do so.
Virginia has already made the “Really” segment of Saturday Night Live and now Jon Stewart is sniffing around. But there’s more to Mickey D’s woes. Wild man Atty. Gen. Kenneth Cuccinelli has bucked the state GOP establishment and is running for governor when Republican power brokers had already hand-picked affable Lt. Gov. Bill Bolling. An even bigger-time wingnut, Bob Marshall, is running for Senate, challenging GOP favorite George Allen. Neither move helps McDonnell.
The blogosphere is rife with rumors that Mickey D is considering some serious backpedalling. Norman Leahy, always a reliable source, reports that some Republican legislators and McDonnell are brainstorming schemes to weaken or delay the ultrasound fiasco, that has brought more than 1,000 protestors to Capitol Hill, not an ordinary event in genteel Richmond. Leahy quotes political insider Paul Goldman as saying, “You don’t get selected the VEEP on a winning political ticket when Saturday Night Live skits are part of the package put together by a Presidential nominee’s team vetting running mates.”
That raises another question. Which candidate would McDonnell serve as VP candidate? The easy answer had been Mitt Romney. But things aren’t going so well for Romney right now. As for Rick Santorum, the last thing they’d need is a VP with as much social conservative baggage as McDonnell has.
McDonnell might be able to finesse the problems by unplugging the transvaginal business and moving forward with his budget. He had planned one of his smoke and mirrors specials to boost transportation funding by cheating education out of a part of the sales tax. Now it looks like we might get a hike in the gasoline tax, at least to mesh with inflation. And that, dear children, would make Mickey D. look worse than Tim Kaine ever could have.
The state Senate has passed a budget bill, which must reconciled with the House of Delegaes budget bill, that seemingly does something right: It rejects Governor Bob McDonnell’s idea of diverting up to one-quarter of a percentage point from the state’s 4.5% sales tax from the General Fund to transportation. Transportation should be funded on a “user pays” basis to the greatest extent possible and should not compete with other core functions of government that lack a dedicated revenue source.
In place of that diversion, the Senate proposes indexing the motor fuels tax, now 17.5 cents per gallon, to the U.S. Department of Labor’s producer price index for non-residential construction. This provision recognizes that the gas tax, adjusted for inflation, has eroded so dramatically since 1986 that the state is fast running out of money for new construction.
Eventually, Americans will shift to alternate energy sources such as all-electric vehicles, propane, natural gas or even fuel cells. At that point, Virginia will have to give serious consideration to a Vehicle Miles Driven tax. But that day is years off.
A more immediate concern is that the Senate bill dumps more money into Virginia’s transportation system without reforming the way the money is spent. It is widely acknowledged that Virginia needs to align decision-making for transportation and land use at the same level of government. The McDonnell administration is inching closer to doing precisely that: devolving responsibility for secondary roads to local governments. The political sticking point is the localities’ fear that they’ll get get stuck with the expense without sufficient means to pay for it.
Added revenue from indexing the gas tax could make devolution more palatable politically if it were used to sweeten the pot for local government. As such, the tax should be tied to a fundamental reform of the transportation system, not part of a Business As Usual budget bill. Use the money to drive structural change that not only puts more money into road building/maintenance but encourages local government officials to make more responsible decisions about land use, which determines demand for roads and highways in the first place.
– JAB
By Peter Galuszka
It’s so-called halftime at the Virginia General Assembly, and with conservative Republicans holding sway and many serious problems facing the Commonwealth, here’s what we’ve come up with so far:
Meanwhile, more pressing matters await, such as a budget. It seems that Gov. Robert F. McDonnell’s plan to put the screws to education and use part of its General Fund payments to boost transportation isn’t getting very far.
Ditto the conservative schemes to stick it to our lazy and inept public school teachers. They want to upend the status quo with new plans to subject teachers with tougher new performance appraisals. Mind you, there has been no solid evidence or public outcry that this is needed. Rather some of the right-wing think tanks decided it should be an issue. One reason could be that some teachers are organized into, God forbid, labor unions. It also has racist overtones since it seems aimed at minority teachers in minority and low-income areas.
The anti-teacher movement seems to have been orchestrated months before the legislative session. Read six months of some of the postings on this blog and you will see that somewhere, someone has decided that public school teachers are a major, major problem. Maybe you didn’t notice yourself, but you read it here first!
The big irony is that McDonnell has worked so hard to recast himself from social to moderate conservative so he can more easily pursue national political ambitions. As much as he spins the GA session as progress, it clearly ain’t. The agenda is being controlled by the likes of Bob Marshall and other wingnuts.
As for me, I blame the Democrats, especially national party boss and former governor Tim Kaine. They let the hard righters get a slender majority in the last election and now there’s hell to pay. Ironically, however, the one who might end up paying the most will be Bob McDonnell.
Posted in Abortion, Blogs and blog administration, Budget, Children and families, Economic development, Economy, Education (K-12), Electoral process, Entitlements, Environment, Finance, Gun rights, Health care, Housing, Immigration, Infrastructure, Labor & workforce, Politics, Race and race relations, Social services, Taxes, The Economy
Tagged goozeviews
By Peter Galuszka
“The Iron Lady,” a biopic starring Meryl Streep, has brought fresh attention to the policies and philosophies of Margaret Thatcher, the ground-breaking leader who served as Great Britain’s Prime Minister for 11 years – from 1979 to 1990.
Always controversial, Thatcher pioneered much of the conservative framework still in play today, such as privatizing state-owned companies, bashing labor unions, cutting budgets, pushing for flat taxes payable at equal rates by rich and poor and promoting the idea of individual opportunity as a national driver.
As we now see two decades later, while initially successful, a lot of Thatcherism turned out to be bunk and we are suffering for it now. That said, I have to admit that Thatcher is a fascinating personality.
My own involvement came in 1987 when I was a magazine correspondent in Moscow. She was visiting Mikhail Gorbachev, the Soviet leader and man she could “do business with.” She and Ronald Reagan set up the policies that helped lead to the transition of the Soviet Union although neither should get too much credit for destroying that Communist-run state. The real cause of death was decades of internal rot, but that’s another subject.
When Thatcher walked up to the podium at the Foreign Ministry press center on the Garden Ring Road in downtown Moscow, the air practically went electric. She was a truly stunning presence. Her direct manner of speech in her high-pitched voice had the audience riveted. She answered questions with great speed and wit. She was a crystallographer by training but had a natural sense of politics and theater.
Reagan, whom I also heard in Moscow, seemed like a purely stage-managed Hollywood production. He entered the stage with a friendly wave and a stunning brown suit, but he seemed extraordinarily simple-minded, as if he didn’t really understand what was going on and was reading from a very good TelePrompter.
Thatcher, to be sure, had plenty of enemies. She came to power when the U.K. was in a recession far worse than the one the U.S. has recently endured. When I visited the West Midlands in the early 1980s, British television news was a steady stream of job cuts. She beat back union and government control that had dominated the economy since World War II and with great fanfare privatized a few big, government-controlled corporations. She led the Brits in their pathetic war with Argentina over the Falklands and took a tough line against the Irish Republican Army. In the process of the latter, her tough stances spurred a number of deadly bombings. Post-Thatcher negotiations finally
sorted things out.
Her model of privatization and budget spending became the role model in the last decades of the 20th century and the decade so far this century. Longer term, her results have been mixed. The Russians were encouraged to follow the Thatcher model with privatization and ended up with the oligarchs and Vladimir Putin. Bill Clinton was actually a Thatcherite and his go-easy regulatory policies regarding Wall Street, along with George W. Bush’s ineptitude, helped set the U.S. up for the Great Recession.
Still, the movie is a good touchstone to ponder the Thatcher years. Despite an excellent performance by Streep, the movie is marred by its boringly-long portrayal of an elderly Thatcher suffering from dementia. It really doesn’t go too far in examining her policies. The movie, like Thatcher herself, seems a promising idea gone wrong.
Posted in Budget, Economic development, Politics, Regulation, Social services, Taxes, Uncategorized
Tagged goozeviews
By Peter Galuszka
As conservatives argue about cutting deficits and keeping low taxes for the rich both in Virginia and nationally, a bigger question is coming up: does Vladimir I. Lenin actually have the answer?
Sounds strange, I know, but not if you read Britain’s center-right weekly business newsweekly, The Economist. In a leader titled, “The Rise of State Capitalism,” they note that the success of state-private economies in China and Singapore, countries such as Brazil and South Africa are flirting with the idea of turning back some of their privatization work and going more with state-owned companies.
As the magazine states: “With the West in a funk and emerging markets flourishing, the Chinese no longer see state-directed firms as a way station on the way to liberal capitalism; rather, they see it as a sustainable model.”
Also underscoring the success of state-influenced economies is a recent and startling Brookings Institution report that rates 200 global urban areas for their economic performance. Shanghai leads the list, followed by cities in Saudi Arabia, Turkey, India and more in China. None is an example of traditional, U.S.-style market capitalism.
Indeed, you have to go pretty far down the list, to spot 19, to find the first U.S. city, which is Houston and that’s all petroleum money. Washington is No. 134. We don’t even get to the Old Dominion until No. 159 and Virginia Beach. Richmond is a stunningly bad No. 191, beating out only comatose Sacramento among U.S. cities.
The study should be a wakeup call to Baconauts and Boomergeddons everywhere that maybe they are barking up the wrong tree. Or maybe, even worse, they are completely clueless. At Mr. Jefferson’s Capitol, legislators are playing shell games with budgets to make Mickey D. McDonnell seem like a modern, Republican governor worthy of a vice presidential run. And, we’re screwing around with public private partnerships such as the massive U.S. 460-area highway to give private biz a cut and let them toll the crap out of the rest of us for years — all in the name of Margaret Thatcher and Ronald Reagan who left the scene more than 20 years ago.
While budget hawks complain about the big bad government and public spending on such things as social services and infrastructure, their beloved model is fading into the dust bin of history. I’m no China expert, but I, like everyone, was taken aback by the modern, efficient cities of Shanghai and
Beijing when I visited in October. Unlike the U.S., transportation was clean, efficient and hassle free.
Of course, The Economist must stay true to its OxBridge roots and come out warning that state capitalism with a big spoon of Asian Mandarin sauce might not be the best strategy for the West. But the trends are jolting and deserve a look.
Del. David Englin, D-Alexandria, has submitted a bill that would require any new legislation establishing or increasing tax loopholes (credits, exemptions, deductions, etc.) to expire within five years.
Tax expenditures, as I have long argued, are out of control at both the federal and state level. Englin’s bill represents a modest step to reining in this monster. The delegate clearly understands the issues at stake, and I wish only that he had gone further.
Tax expenditures, he writes in today’s Times-Dispatch, deprive the state of $12.5 billion in annual revenue (2008 figures). Eliminating the loopholes would free up resources to reduce tax rates (my preference) or boost spending in critical areas. A majority of the tax expenditures run on auto-pilot with little or no legislative oversight.
Englin has personally resolved not to vote for a tax preference unless it includes a sunset date and “a requirement that the Department of Taxation report the intent of the policy and how much revenue it cost” — information legislators need in order to weigh costs and benefits. He should make that second requirement the subject of a second bill, and he should apply it to all tax preferences, not just new ones.
– JAB
By Peter Galuszka
Virginia residents have long enjoyed a special advantage with higher education. Tuition at some of the country’s best-rated public universities — the University of Virginia, the College of William and Mary and Virginia Tech — is relatively modest. The schools offer a great deal for parents and students compared with nationally ranked private colleges.
But this advantage is unraveling. The process began seven years ago, when the General Assembly agreed to a deal whereby it would pay not as much for top public universities. In exchange, the schools would get more autonomy, including more freedom to set their own tuitions, capital spending programs and curricula.
The result? A creeping privatization that threatens to undermine the very
advantages that make Virginia’s top public schools what they are.
To be sure, state education bureaucrats and legislators call it not “privatizing” but “restructuring.” This euphemism means the schools will
gradually demand tuition closer to what is charged at the top national, private institutions but won’t have to go through the hassle that true privatization would entail — such as the selling of public property and making good on repaying decades of public investment.
There is some logic to this approach: If Virginia’s elite public colleges
start approaching market rates for tuition, the thinking goes, state money could be freed up to spend on lesser institutions. More financial-aid money would become available. The state could use those resources to reach for its goal of 100,000 more students earning degrees. Since 2005, when the concept was formalized in General Assembly legislation, Virginia Commonwealth University added itself to the list of schools willing to trade funding for autonomy.
The same year that “restructuring” was approved, John T. Casteen II, then the president of U-Va., announced an ambitious campaign to raise $3 billion through fundraising. Most of that has been collected, although the effort to raise so much private money at a public school raised eyebrows. More recently, Taylor Reveley, president of William and Mary, proposed
bringing his school’s tuition levels to market rates, which, for a nationally rated private institution, would be about $45,000 a year for tuition, room and board. Out-of-state W&M students now pay $44,854 a year, while in-state students pay $22,024.
Reveley notes that Richmond provides only 13 percent of W&M’s funding,
which is way down from the 43 percent of 30 years ago. This trend has been even more pronounced at other elite Virginia public colleges. At the University of Virginia, the state pays less than 8 percent of what the school needs. At Tech, the process has been slower. In 2000, the state provided 58 percent of the school’s needs; today it’s 28 percent.
Reveley argues that if more in-state parents or students paid full freight,
then his school could offer more generous financial-aid packages to middle- and lower-income students. He also believes that as top schools become more self-sustaining, a second tier of Virginia schools could be given more state funding and raise their own academic standings. These would include Old Dominion, George Mason, James Madison, Radford, Longwood and the state’s community college system.
But there is cause to worry about this argument. At present, many complain that lower-income Virginians have been forced to compete with an increasing number of deep-pocketed out-of-staters, whose higher tuition helps to balance the schools’ books. As those schools look to capture more revenue via in-state tuition, they will face strong incentives to accept a greater portion of in-state students with the means to pay all or most of their own way. And even with increased aid, worthy but less affluent students will confront barriers. Some will simply opt for less expensive, less competitive schools; others will emerge from school more deeply in debt.
Such an uneven playing field is contrary to the spirit of a state-funded
higher education: Why should a kid from affluent Fairfax have a better chance at attending U-Va. or W&M than someone with the same grades and test scores from Big Stone Gap?
I’ve noticed this kind of elitism beginning to appear in “Virginia” magazine,
published by the school’s alumni association. Its pages are filled with four-color advertisements hawking multimillion estates mostly in blue-blood
horse country. The message that’s suggested? “If you can’t afford these kinds of properties, then maybe you don’t belong at Mr. Jefferson’s University.”
Privatization is thought of by Virginia conservatives and even some moderates as a panacea for addressing the state’s budget woes while adhering to the state’s dominant anti-tax ideology. Tax hawks, for instance, constantly dodge the need for higher taxes to pay for highways by tossing the problem over to public-private partnerships. But applying the same thinking to public higher education risks undermining the very purpose of such institutions — building the highly educated middle class needed to keep Virginia competitive nationally and globally.
A straight sell-off of state schools isn’t likely. What is possible, says
James Alessio, chief of higher education restructuring at the State Council for Higher Education, is a steady series of tuition hikes in the 5 to 7 percent range. “Within maybe 40 years, you’ll see tuition at the public schools go to $40,000 or $50,000,” he told me.
Once that happens, the stealthy, half-privatization of Virginia’s academic
jewels will be complete, and probably irreversible. One possible solution comes from the University of California at Berkeley, which announced this month that it will cap tuition at 15 percent of what “middle class” families make, defined as $80,000 to $140,000 a year.
Virginia could try something similar. Otherwise, on its current trajectory, the state is fast moving toward a two-tier public college system heavily based on income — the exact opposite of what public higher education is supposed to be.
First published in The Washington Post
Posted in Budget, Children and families, Economic development, Economy, Education (higher ed), Politics, Taxes
Tagged goozeviews
Boomergeddon is the day investors stop buying U.S. Treasuries — the day the U.S. government goes into default, the global economy is thrown into turmoil, the American empire begins to crumble, and the social safety net starts to unravel. Buy the book here.
