Bacon's Rebellion

A Nonsensical Proposal

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by

Dick Hall-Sizemore
in , , ,

by Dick Hall-Sizemore

Governor Youngkin has taken on the car tax again, sorta. Rather than attack it directly, he proposes a Rube Goldberg process for some Virginians to get some relief from the car tax.

Here is how it would work: Individual taxpayers with a federal AGI of $50,000 or less would get a refundable credit of $150 or the amount of car tax actually paid to the locality, whichever is less. For married couples filing a joint return, the credit would be $300 or the actual amount paid to the locality, whichever is less. https://budget.lis.virginia.gov/get/budget/5050/HB1600/ (p. 731)

But, there is a catch. An individual would not be eligible for such credit if his or her county or city increased its car tax rate more than 2.5 percent over the rate it imposed the previous year. The governor seems to think this is a cap on the annual increase enacted by localities, but it is not. It is a penalty imposed on the residents of a locality that increases its car tax rate by more than 2.5 percent.

All this would be paid for over the next three years with a $1.1 billion fund created out of current surplus revenues.

This proposal will make no one happy. All those individuals or couples who make more than $50,000 or $100,000, respectively, will not get any relief. Those folks who qualify for the credit on their income taxes will still be getting a car tax bill from their locality and have to write out checks to pay it. Because they are likely to forget about the income tax credit, they still will be mad about paying a car tax.

It would have been much simpler to do away with the car tax altogether and authorize localities to increase their tax rate by up to 1 percent to replace the revenue lost from the car tax. It is much less painful to pay an extra few cents for each purchase than to pay a big car tax bill in one big payment.

Going with that approach, the governor would have gotten credit for abolishing the car tax and freed up $2 billion (the $1.1 billion in surplus revenue he proposed using for his proposal and the $900 million currently in the budget to reimburse localities for lost revenue.) Here are some conservative, one-time uses for that money, two of which would reduce the need for general fund appropriations in the future:

  1. Additional contribution to the Virginia Retirement System;
  2. Substitute general fund appropriation for unused bond appropriation for existing capital projects;
  3. Provide for local school construction and renovation projects.

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11 responses to “A Nonsensical Proposal”

  1. James McCarthy Avatar
    James McCarthy

    TY for parsing this tax non-reduction.

  2. Stephen Haner Avatar
    Stephen Haner

    The set up is similar to the Earned Income Tax Credit, but for a smaller amount of benefit. Eliminating the tax sure would be simpler, but the local governments would never stand for that, and you know that Dick. Some are very dependent on this tax.

    Best proposal is to extend the higher standard deduction. That should be a unanimous no-brainer. He should have bumped it up more, which would have reached more people than the car tax rebate or no tax on tips.

  3. Nancy Naive Avatar
    Nancy Naive

    Wait. It’s one car. How would being married increase the PPT paid?

  4. f/k/a_tmtfairfax Avatar
    f/k/a_tmtfairfax

    For what it is worth, we have a car tax in North Carolina. It must be paid in connection with the annual automobile registration fees. I haven't heard strong objections to it. Perhaps, it's because our individual income tax rate is reduced annually to the ultimate 3.99% rate. The legislature, some time ago, broadened the base for the income tax and instituted a rate reduction plan.

  5. James A. Bacon Avatar
    James A. Bacon

    As Dick describes the proposed car-tax cut, it sounds like a Rube Goldberg mechanism that most people won't understand. Keep it simple, stupid. I like Dick's proposal: Eliminate the car tax outright and give localities options for making up the lost revenue. Anyone can understand that.

    Personally, I like to buy a car new, take good care of it, and own it until it breaks down…. which means in the out years, the blue-book value is very low and I pay very low car taxes. So, I don't find the tax as objectionable as some do.

  6. LarrytheG Avatar
    LarrytheG

    I can't believe he is doing this to be honest.

    I too, HATE, the car tax but it funds the counties priorities so if you take it away, either the county has to cut spending or they have to come up with any way to make up that tax revenue.

    The cynics and low info voters will say that the local govt SHOULD cut spending – as if they are actually spending more than they should be which
    is really out of touch with realities for most counties. They need those revenues to help pay for schools and public safety. What would you like cut
    if not?

    But why in heck is the State govt involved with a local tax issue to start with?

    If local voters want lower taxes and are willing to cut spending for schools and public safety, let them work that out at elections.

    Youngkin is playing that whacky Gilmore game!

  7. DJRippert Avatar
    DJRippert

    While Youngkin's proposal may be awkward (wealth redistribution schemes generally are awkward), our boy Mark Warner is busy trying to gaslight America:

    https://x.com/MarkWarner/status/1869507040621867035
    The sheer absurdity of that comment should be obvious to everybody.

    It is apparently obvious to the people of Western North Carolina who were actually affected by the hurricane:

    https://x.com/matt_vanswol/status/1869749381622362134
    Once again, an elected elitist from Virginia is exhibiting pure contempt for the intelligence of the American people.

  8. LarrytheG Avatar
    LarrytheG

    re: " It would have been much simpler to do away with the car tax altogether and authorize localities to increase their tax rate by up to 1 percent to replace the revenue lost from the car tax. It is much less painful to pay an extra few cents for each purchase than to pay a big car tax bill in one big payment."

    It's really amazing to me that the following states have NO Income tax:

    Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming

    Many (not all) make it up with sales taxes – at the State and Local level.

    these states do not have sales taxes:

    Alaska.
    Delaware.
    Montana.
    New Hampshire.
    Oregon.

    and this chart by the Tax Foundation shows Va to not be a "low" tax state:

    https://uploads.disquscdn.com/images/4d9583aa69500e860fa657f340584dcfe7a49a413af58c3ff76b492ef21e2f3b.png

  9. energyNOW_Fan Avatar
    energyNOW_Fan

    I don't think that's going to help Michael Vick if he moves back to Va.

  10. f/k/a_tmtfairfax Avatar
    f/k/a_tmtfairfax

    "Every tub must stand on its own bottom." A sentence used by my law school torts professor and later Democratic FCC commissioner and UVA law professor Glen Robinson. Society works only if everyone supports oneself. Of course, there are exceptions, children, the elderly and the disabled. Local governments generally have increased spending. often on social and income transfer programs, much faster than the growth in population and inflation. Programs are sometimes duplicated; rarely, if ever, evaluated for effectiveness and efficiency; and often subject to waste, fraud and abuse.

    Today's local government is simply not sustainable. The same can be said for state and federal governments too. Imagine a nation where government improved its effectiveness and efficiency by 20%. Image a nation where, like much of the private sector, government did more for less.

  11. Julie Smith Avatar
    Julie Smith

    I strongly disagree with Governor Youngkin's proposal. Why am I always given the shaft, because I am a single person, educated, hard working, making a decent living wage, but not at poverty level. I never get a break, even though I contribute the most! Why do poor schmucks get all the discounts, while I always have to pay full price?! And while I am logged on, I disagree with the copycat No Tax on Tips! My earned wages AND Social Security are fully taxed. I have no pity or empathy, until every one is treated fairly.

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