Bacon's Rebellion

I haven’t heard much about “affordable housing” in the transportation debate, but it’s been lurking there in the background. One of the mechanisms the state Senate proposes to employ to raise $1 billion a year for new transportation expenditures is a tax on real estate transactions. In an earlier post in this blog, I noted that it made absolutely no sense to tax real estate transactions in order to fund transportation projects — there was no rational nexus between those who paid the tax and those who benefited from the expenditure.

It’s nice to see that someone else fails to see the common sense in the proposal. Del. Rosalyn Dance, D-Petersburg, has spoken out against a version of the tax now being considered in the House of Delegates. In prepared remarks, she said on the House floor:

Affordable housing is essential for all Virginians. Affordability of housing diminishes each time another tax or fee is added to the homeowner’s bill. And, as all of you can attest, many of us are seeing our assessments going through the roof!

During this last election cycle, all the candidates for Governor recognized this when they proposed to protect homeowners from real estate tax bills — some of which have doubled for many Virginians in the past five years.

I hope many of you will agree with me that home equity is the single greatest source of retirement savings for most homeowners.

Real estate and grantor taxes leave Virginia’s seniors with less money in their retirement to pay for skyrocketing health care and other costs.

I hear people talking about how this tax is only a few hundred dollars — but to my constituents in Petersburg and to many of yours across the Commonwealth — a few hundred dollars is real money.

Virginia Commonwealth University Political Science Professor Robert D. Holsworth was right this last election cycle when he observed in the Washington Post that, “Virginia is on the verge of a property tax revolt in many localities…”

… Our friends in the Senate propose a plan which will require property owners to pay almost 50% more in real estate taxes in the year they sell their property.

Encouraging homeownership is really encouraging the American Dream, Mr. Speaker. This is the time when we are all going to make some difficult choices, but I encourage the conferees and the House to oppose any fee that will be a barrier to Virginians wishing to own their homes.

Call me Mr. Cranky. Sometimes, it seems, nothing pleases me. Take car tax relief, for instance. I don’t agree with anyone on that issue.

The Political Class doesn’t like car tax relief because it diverts too much money from spending on their favorite government programs. Well, that ticks me off because taxpayers do deserve a break! Giving the Political Class more tax money is like giving a crack addict “just one more hit.” If you give politicians the money they want, they lose all pressure to think creatively and spend with discipline. What we need is more creativity, innovation, productivity and discipline in government — not more money.

Take Gov. Mark R. Warner. When the state faced a fiscal crisis, he did a tremendous job of cutting expenses and rationalizing government. As soon as the crisis was over, it was back to business as usual, looking for ways to spend all the money — and more — that came rolling in. The impetus for cost cutting just died.

So, I believe in giving money back to the taxpayers. But the car tax has got to be the most jury-rigged arrangement I can think of to do it. As Ronald Reagan taught Republicans — before they promptly forgot the lessons — taxes affect behavior. If you’re going to cut taxes, cut them in a way that creates incentives for people to behave in socially useful ways.

What does the car tax relief do? It reduces the cost of car ownership. In other words, it encourages people to spend more money on newer, more expensive cars. That’s just dandy if you’re an automobile dealer, but the problem in our society today is not a lack of conspicuous consumption. If you cut taxes, cut income taxes or business taxes. Reward people for working harder or doing business in Virginia — not for buying bigger cars!

When you reward people for working harder and doing business in Virginia, you increase economic activity. Greater economic activity offsets at least a portion of the revenue you lost through the tax increase. Duh!

Instead of expending political capital on nickle-and-dime tweaks to the car tax — and raising the cap on car tax relief by $50 million is nickle-and-dime in the context of a $35 billio-a-year state budget — the House of Delegates needs to think boldly about tax reform. How about applying the concept of flat taxes to Virginia’s income tax? Eliminate the billion dollars or more in income-tax loopholes identified by the Warner administration, and use that money to reduce the top rate! Or repeal the BPOL tax and stimulate entrepreneurship. Think creatively, darn it!

I’ve always thought of Lieutenant Governor Bill Bolling as a low-tax conservative, but he sure didn’t sound like one in the Feb. 28 edition of the Bolling Report. In the newsletter, he raises the question: Where does all the money go?

Over the past 10 years, state spending has increased 80 percent, from $16 billion in 1996 to $29 billion in 2005. The average annual increase during this period was 7 percent. That sounds like a lot, he says. But it’s not as bad as it seems. When you adjust for inflation and population growth, he notes, state spending has increased only 3 percent annually.

Oh, I feel a lot better now. Actually, I don’t. Has the average paycheck increased inflation+3% a year over the past 10 years? No, not close. Most Virginians are lucky if their paychecks kept up with inflation.

Bolling is saying that state spending increased “only” 30 percent over 10 years adjusted for inflation and population growth. That sounds like a lot of growth to me. Even more alarming, the state’s appetite for money hasn’t slakened in the slightest. Now the Political Establishment wants to raise another $1 billion a year!

(Bolling does make one legitimate point. A big chunk of the increased state “spending” consists of payments to localities to reimburse taxpayers for the car tax. Take that out of the equation, and real, adjusted state spending may have increased “only” 20 percent or so, I’d guesstimate, over the decade.)

Bolling gives a laundry list of all the core functions that the state undertakes — roads, K-12, higher education, public safety, Medicaid, mental health, etc. These are all very important things. But he implicitly accepts the notion that there’s not much that we can do about the ever-escalating expenditures. He passively accepts the idea that Virginians must continue providing these core functions as we always have. There’s no mention in his missive about restructuring, re-engineering or re-thinking the way in which the state meets any of these core needs.

Here’s the brutal fact: At the end of the day, if Virginians bite the bullet and pay the taxes, nothing will change. When there is no pain, the Political Class feels no pressure to undertake fundamental reforms of any kind.

To his credit, Bolling concludes his letter by saying that, with record revenues, Virginia should not be raising taxes now. “We can have the best of both worlds,” he writes. “We can invest in the things that help improve our quality of life and keep taxes as low as possible. These goals are not mutually exclusive. It’s all about leadership.” But it’s the wimpiest case against raising taxes that I’ve seen in a long, long time.

(Thanks to Phil Rodokanakis for passing along the Bolling Report.)

Looks like Virginia has its own version of an anti-Wal-Mart bill. A bill winding its way through the General Assembly may not force the retail giant to pay health insurance to all of its employees, as our neighbor to the north did, but the legislation does restrict the ability of Wal Mart and other giant retailers to compete in Virginia.

The Senate Commerce & Labor Committee has endorsed a bill that passed 98 to 0 in the House of Delegates that would prevent Wal-Mart or other retailers from opening branch banks in their Virginia stores under the auspices of an industrial loan association. But the bill specifically grandfathers First Market Bank, which is owned in part by the Ukrops family and located in most Ukrops grocery stores in the Richmond region.

I’m a big fan of the Ukrops brothers, who have contributed generously to worthy Richmond causes, and I shop regularly at their stores. But I don’t see why they should be allowed to put branch banks in their stores while their competitors cannot. There may be more to the story than appears, very briefly, at the bottom of Greg Edwards’ article in the Richmond Times-Dispatch today. If so, I would like to know what it is.

You can view the bill here.

Those who follow the MainStream Media in the northern part of Virginia know that the list of unethical practices and potential crimes at Fannie Mae over the past 10 years is growing and the topic of editorial and news analysis outrage.

MainStream Media has not yet noted that the real crime at Fannie Mae (and Freddy Mac) is that these federal agencies have catalyzed, leveraged and exacerbated the creation of the wrong size houses in the wrong locations. They are major contributors to the Shelter Crisis. See our column “Solutions to the Shelter Crisis,” 24 July 2005.

The actions of Fannie Mae have generated profits for financial institutions, land speculators and the raw land development industry. They have created inflated home prices and paper profits for house speculators. The modest increase in home ownership – a good thing for some – is off set by the drastic, long-term economic impact of dysfunctional settlement patterns – a very bad thing for everyone.

EMR

There’s a big debate brewing between the state Senate and the House of Delegates over what to do with sexual predators after they’ve served their jail time: Should they remain confined, in a process called civil commitment, or should some of them be returned to the community under heavy supervision including satellite tracking?

The House wants a 300-bed facility; the Senate wants 100 beds. Cost is a major factor. According to Newport News Daily News reporter Hugh Lessig: “The two sides are roughly $40 million apart in construction and operating costs for a civil commitment facility – the Senate around $36 million and the House around $76 million.”

I would lean toward’s the House position on this one, which errs on the side of public safety. But I don’t see it as a black-and-white issue. Cost is unavoidably a consideration — that $40 million could be used many other ways to improve public safety. So is the fact that sexual predators, having paid for their crime, do have rights.

Looks like Larry Sabato and the University of Virginia Center for Politics will be moving from their cramped quarters on the university grounds to the Birdwood estate near the Boar’s Head Inn and the Farmington Country Club — if $10 million can be found for renovations of the dilapidated old manor house, according to the Charlottesville Daily Progress.

Said Sabato: “It’s a gorgeous location and it looks back on an unspoiled view of the mountains Jefferson saw.”

Last year, Sabato gave $1 million to endow the Center’s programs.

Bad news from VDOT… The road-building agency spent $40 million more on maintenance in the first seven months of fiscal 2006 than it had planned. Now it’s trying to make up the deficit by cutting back on maintenance work and equipment purchases. Details at the Road to Ruin blog.

Here are the “Principles of Community” that will be enforced by the “SafeWatch” program in Virginia Tech (see previous post, “The Thought Police Have Arrived):

• We affirm the inherent dignity and value of every person and strive to maintain a climate for work and learning based on mutual respect and understanding.
• We affirm the right of each person to express thoughts and opinions freely. We encourage open expression within a climate of civility, sensitivity and mutual respect.
• We affirm the value of human diversity because it enriches our lives and the university. We acknowledge and respect our differences while affirming our common humanity.
• We reject all forms of prejudice and discrimination, including those based on age, color, disability, gender, national origin, political affiliation, race, religion, sexual orientation, and veteran status. We take individual and collective responsibility for helping to eliminate bias and discrimination and to increase our own understanding of these issues through education, training and interaction with others.
• We pledge our collective commitment to these principles in the spirit of the Virginia Tech motto of Ut Prosim (That I May Serve).

Most Virginians would share most of these sentiments. The problem isn’t the principles themselves, but how they are enforced, and who enforces them. A couple of red flags:

First: Everyone has the right to express themselves freely, but only “within a climate of civility, sensitivity and mutual respect.” Who defines what behavior falls within the acceptable parameters of “civility” and “sensitivity”? Who has the burden of proof when someone is offended by something someone else says — the person who took offense? Or the person who made the remark?

Second: “We take individual and collective responsibility for helping to eliminate bias and discrimination and to increase our own understanding of these issues through education, training and interaction with others.” Who’s in charge of the educating and training here? What form does that “education and training” take? And how much “diversity” of points of view is permitted?

Nervous yet? Now check the online “Incident Report Form.” If the political/philosophical orientation of this initiative doesn’t smack you over the head, here is all you need to know: People are asked to fill out “general information” about themselves. Under the “gender” category, there four (count ’em four!) choices: male, female, transgender, and questioning. Why not “neuter,” while we’re at it? We wouldn’t want to discriminate against castrati, would we?

Hmmm. I’m wondering… Could that last remark be construed as “insensitive”? Could I already be a candidate for “re-education”?

The Feb. 27, 2006, edition of Bacon’s Rebellion has been published. Columns include:

Seek the Intersection
Innovation can be managed, says Frans Johansson, author of “The Medici Effect.” And what individuals and enterprises can do, so can entire communities.
by James A. Bacon

What’s the Big Idea?
The people at Play don’t just talk creativity — they live it. When they advise clients to tear down “walls” and “boundaries,” they apply the nostrum to themselves — quite literally.
by James A. Bacon

The Special Session Is Now
The outline of a compromise on transportation funding is coming dimly into view: Some new funds now, a full-fledged plan later (maybe).
by Doug Koelemay

Legislation by Extortion
The state Senate is enacting spending programs predicated on taxes that haven’t been passed yet. Will Chichester & Co. get their way again by threatening another government shut-down?
by Patrick McSweeney

Standing up for Property Rights
The House of Delegates has passed legislation that will protect property owners from unjust takings. Unfortunately, the Senate’s version of the bill could do more harm than good.
by Patrick McSweeney

Goldman Silenced? I Doubt It
Paul Goldman hasn’t revealed his plans since resigning as Doug Wilder’s senior policy advisor. But you can count on one thing from the master political tactician: He’ll be back!
by Steven Sisson

$650 Million in Hiding
There is a lot more new money for transportation projects than commonly realized — if lawmakers would only count it!
by Michael Thompson

Red State Blues
Obsessed with raising taxes, Republican leaders in the state Senate risk transforming Virginia into a blue state — and losing their majority status in the bargain.
by Philip Rodokanakis

Stop Me Before I Tax Again
Not content with imposing a record tax increase in 2004, Virginia’s Imperial Senate proposes outdoing its meager effort with another, even bigger round.
by Jim Bowden

Little Boy Blue
Like the fabled farm boy who fell asleep while the farm animals ran wild, Virginia voters appear oblivious to out-of-control state spending — potentially 36 percent in just four years.
by Peter Ferrara

Nice & Curious Questions:
Branded Restrooms: What’s Next for Virginia’s Rest Stops?
by Edwin S. Clay III and Patricia Bangs

I’m sorry, sometimes I forget: Are we living in the United States, circa 2006, or are we living in the People’s Republic of China, circa 1969? It’s hard to tell with news like this: Virginia Tech has just launched a “SafeWatch” program to promote “individual and collective responsibility among students, faculty, staff, and guests” to incorporate the Virginia Tech “Principles of Community” into their interpersonal and intergroup relationships.

Patterned after “neighborhood watch” programs, SafeWatch will “promote understanding” of university policies and community expectations related to harassment, discrimination, or similar behaviors, and provide a way to report instances when policies and expectations are not followed.

Central to the program is a new SafeWatch website that provides a means for community members to report occurrences of discrimination or harassment related to age, color, disability, gender, national origin, political affiliation, race, religion, sexual orientation, and veterans’ status.

Just wait, this is a disaster waiting to happen.

Now comes news that the General Assembly is pondering legislation that would make it a misdemeanor to sell halal food — the Muslim counterpart to kosher food — in Virginia under false pretenses. An estimated 350,000 Muslims live in the Commonwealth. In Northern Virginia alone, there are some 45 mosques.

Everybody’s “for” education, and everybody wants to pump more money into Virginia’s educational system. From what I can tell, it looks like the Dems want to increase educational spending a lot more than the GOP-dominated House of Delegates in the next biennial budget. But I’ve seen very little discussion on the topic.

According to documents maintained by the Department of Planning and Budget, here are the budget numbers of the Department of Education, including Fiscal 2007 and 2008 proposed by departing Gov. Mark R. Warner:

FY 2003…… $ 9.55 billion
FY 2004…… $ 9.97 billion (+4.4 percent)
FY 2005…… $11.2o billion (+12.4 percent)
FY 2006…… $12.05 billion (+7.6 percent)
FY 2007…… $13.70 billion (proposed) (+13.7 percent)
FY 2008…… $13.95 billion (proposed) (+1.8 percent)

As can be readily seen, after the “starving time” of the early Warner administration, spending on education has soared, and would continue to soar if Warner’s proposed budget were enacted. The proposed 2007/2008 budget represents a 16.4 percent biennial budget-to-biennial budget increase.

Now, here’s what Vincent F. Callahan, Jr., House appropriations chairman, says the House budget is doing for education:

The budget will provide approximately $11.5 billion in funding for public education over the next two years. This represents an increase of $1.5 billion over the current funding level or approximately 36 percent of the net new revenues available. … The budget will invest approximately $419 million in additional general fund support for higher education. This represents an increase of approximately 13 percent over base funding levels.

If I’m comparing apples to apples, in the House budget, educational spending would increase “only” 8 percent from one biennial budget to the next. Bottom line: The House would increase education spending at half the rate of the Warner plan. (If I’m comparing apples to oranges, I’d appreciate it if someone would let me know.)

The House plan is a bad thing if you think the only solution to Virginia’s educational woes is pouring more money into the existing system. It’s a good thing if you think there’s a limited amount that the system can usefully absorb, or if you think the system needs serious reform. So far, I’ve seen very little debate on this issue. Any observations?

I just can’t get agitated about the Danny LeBlanc controversy. It’s not as if Gov. Timothy M. Kaine wants to appoint LeBlanc, a former state AFL-CIO president who opposes the Right-to-Work law, to Secretary of Commerce and Trade, where he could do some damage. The Governor wants to make LeBlanc Secretary of the Commonwealth, where he’s in charge of appointments to sundry boards and commissions — in effect, Secretary of Patronage.

That’s what happens when you win the election. You appoint a party stalwart to hand out rewards to your supporters. If LeBlanc doesn’t fill the position, Kaine will find another partisan ally to do the job. My advice to House Republicans: Get over it. Act nice. Throw the Governor a bone.

I’ve seen a lot of loose numbers thrown around regarding the size and impact of the 2004 tax increase on the current budget surplus. (I’ve tossed some of ’em around myself.) Here are hard numbers from Del. Vincent F. Callahan, Jr., R-McLean, chairman of the House Appropriations Committee. In a press release issued today, Callahan writes:

For those that were here during the 2004 Session, you may recall the General Assembly grappled with building a new two-year budget. At that time, it was expected that we would have approximately $1.8 billion in net new revenues available to meet our spending obligations. It was claimed that this was insufficient to meet the Commonwealth’s needs, and that additional revenue was needed. After a protracted debate and extended legislative Session, taxes were increased nearly $1.5 billion dollars. There was much self congratulation that Virginia’s fiscal house was back in order.

You may also recall that two months after that budget was adopted, Virginia received some surprising news, that the fiscal year would end with $325 million more than projected or perhaps predicted.

That happy news led to the first of several revisions to the revenue forecast during the current biennium. In fact, the most recent revision to the current fiscal year projects that general fund revenues are now forecast to generate an additional $1.4 billion over and above the revenues assumed when we left here last year.

Since that fateful day in May of 2004, the cumulative effect of Virginia’s growing economy means that what started out as $1.8 billion in new revenue growth now appears to be closer to $4.9 billion over the biennium, or 275% greater than the original biennial forecast.