premise behind the Virginia Chamber of Commerce’s
oft-discussed endorsement of a tax increase was
didn’t believe the General Assembly could produce
a credible budget without additional revenue. We
didn’t think the legislature could make the cuts
in non-essential programs sufficient to pay for the
good stuff and satisfy the credit rating agencies.
events of the past month have proven us right
anti-tax, tight-fisted House of Delegates has
adopted a proposed state budget for 2004-06 that
closely mirrors Gov. Mark R. Warner’s $59 billion
House cut $109 million from the governor’s $27
billion General Fund proposal (see chart below); total revenue amounts to 99.6 percent
of the governor’s total projected revenue. I guess that four-tenths of one percent makes
all the difference.
of the no-tax position have shifted their rhetoric
and now defend their budget as avoiding general
tax increases. But to avoid the sales tax increase proposed by
the governor and adopted by the Senate -- an increase
of one cent per dollar offset by a lower tax on food
-- the House proposes to do the following:
Eliminate the sales tax exemption for commercial and industrial
inputs on some of
Virginia’s basic industries, in effect raising the final
cost of electricity, natural gas, telecommunications
and various modes of transportation (air, rail,
ship, truck and – yes – spacecraft!). Right now
nobody knows how much money House Bill 1488 will
raise, but the House assumes $260 million a year.
dollar impact is probably equivalent to the
additional sales taxes the business community would
have paid under the one-cent general increase (since
businesses pay about 35 percent of all sales and use
taxes.) The difference is that the impact falls heavily
on a few companies and their customers.
is the story of the entire House approach: make a
few people and companies pay a whole lot more to avoid making everybody pay a little more, hoping that most voters won’t notice.
Continue the “accelerated”
sales tax, demanding that retailers pay the
sales tax for July in June.
This no longer gains the state any money, but
the governor wanted to end the practice, reducing
revenue in the first fiscal year by $181 million. By
keeping this accounting gimmick in place, the House
had $181 million more to spend.
Continue diversion of the auto insurance premium tax, pledged to
transportation in 2000 but moved back to the general
fund in 2001. (Perhaps after three straight years we
can longer call it a "raid" on transportation.) The
governor proposed to finally keep this promise. The
House move reduces the transportation program he
proposed by $270 million.
A collection of additional
fee increases and budget actions, including a
two percent tax on rental cars, an increase of
in the markup at ABC stores and higher fees for
various ABC event and vendor licenses. (The
amendment to that particular section conveniently
strikes the word “taxes” and inserts “fees.”
See how easy it is to mollify the GOP right
wing? Pay no
attention to that tax increase behind the curtain.)
these really better choices than a straight-up sales
tax increase as advocated by the Virginia Chamber?
Will they have a greater or a lesser impact
on the economy? On
individuals? The point can be argued. If
they survive into the final budget, the real
decision on their wisdom will come from Moody’s
Investor Services and the other bond rating agencies
that will pass judgment on Virginia’s threatened AAA credit rating.
hope that “consistency” is not one of Wall
same House of Delegates that voted to remove the
sales tax exemptions on 12 commercial and industrial
categories continues to expand or maintain the list
of exemptions in other areas.
On Wednesday, for example, the House passed
Senate Bill 571, continuing the exemption for film
and video production (such as when movies or TV
episodes are shot in
Virginia), and Senate Bill 533, continuing the exemption for
materials purchased for certain kinds of printed
Phil Hamilton, R-Newport News, author of House Bill 1488, offered
floor substitutes to both bills which would have
eliminated all the sales tax exemptions in those
code sections (mainly broadcasting, cable TV and
the House, perhaps having learned the wisdom of
“fool me twice, shame on me,” balked and then
passed the bills un-amended.
repudiated the telephone eavesdroppers, but some are
not above reading somebody else’s mail out loud on
the House floor. Hamilton
took great pleasure in quoting aloud one of my
e-mail messages (which did not include him as an
he liked the line so much, I reprint it here:
House continues to pass new exemptions – a bill
got out of House Finance an hour or so ago extending
the exemption for film and video production.
Michael Eisner and Jane Fonda get a sales tax
exemption, but the investor-owned utilities that
power this great Commonwealth and dozens of
companies providing permanent jobs no longer will.
That will be fun to contrast come election time."
was a mistake on my part, which I regret.
should have said: “hundreds
of companies providing permanent jobs.”
March 1, 2004