Category Archives: Budgets

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

Governor’s Budget Transformed

Gov. Youngkin addressing media about budget changes, with Senators Lucas and Locke looking on. Photo credit: Richmond Times Dispatch

by Dick Hall-Sizemore

In my almost 50 years of working around, and following, the General Assembly, I do not think I have ever seen the legislature take apart a governor’s budget bill to the extent that this General Assembly just demolished Gov. Youngkin’s budget.

The change that had the most impact was the jettisoning of the governor’s proposed tax package. Steve Haner has previously described the legislature’s actions (here and here). To summarize, the legislature rejected the governor’s proposed tax cuts, embraced his proposal to expand the sales tax to digital services, and went one step further by expanding the sales tax to cover digital services between companies.

The Governor’s proposal would have resulted in about $1 billion less in general fund revenue over the biennium. The move by the legislature was projected to increase general fund revenue by $1 billion over the biennium. That is a $2 billion swing in general fund revenue available for appropriation. And the Democrats in the majority on the budget committees of both houses were happy to use that extra money to spend on their priorities, primarily K-12. One only has to peruse the conference report to see a plethora of appropriation increases. Continue reading

Added Pay Won’t Make Teachers Want to Stay in Bad Teaching Environments

by Nancy Almasi

Abby Zwerner, the Newport News teacher shot by a 6-year-old student a year ago, doubts she will ever return to teaching. In addition to her lingering injuries and psychological trauma, Zwerner is suing the Newport News School District for ignoring multiple warnings that the student had a gun and was prone to violence. The local school board tried to block the suit from going forward, arguing that the teacher was only entitled to worker’s compensation. A judge disagreed, and the suit is moving forward.

While this is an extreme example, teachers across the Commonwealth and the country have been quitting in droves. Sadly, the lingering effects from the pandemic have only made matters worse. USA Today reported that teachers have joined the “Great Resignation,” as student behavior has become their number-one complaint.

One former teacher noted that emotional outbursts from students have become commonplace. She also noted that she was forced to cover for other teachers due to staff shortages — limiting her ability to connect with her students and eating into her planning time. She ended up quitting in the middle of the school year – a catastrophe for her students and fellow teachers. “It got so bad,” she said, ‘’I was very overwhelmed and stressed. I was anxious and tired all the time.” 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

Bait and Switch: Reform Reverts to Mo’ Money

By Chris Braunlich

Some years back, I ran into a friend, a Virginia Education Association unit chair, outside the General Assembly building, there to lobby on behalf of a state-wide teacher salary increase. Continue reading

The Camel in the Tent

In 2022, the General Assembly disregarded two long-standing principles of funding transportation projects in the Commonwealth.  Republican Gov. Youngkin followed down that path this year.

The General Assembly has dedicated sources of revenue to be used for transportation, with general government functions being financed by general income and sales taxes and other special funds. The revenue sources for transportation include taxes on gasoline and other fuels, motor vehicle licensing and titling taxes, operating licenses fees, and 0.5 percent of the 4.3 percent state sales tax. Localities in specified regions of the state are authorized to levy an additional 0.7 percent sales tax to be used for transportation. The concept of having funding for transportation and general government separated was so ingrained in the legislature that there have been attempts in the past to create a “lockbox” for transportation funds to avoid their being used for other general government purposes. The latest such attempt was in 2018.

By statute the legislature has stipulated broadly how transportation funding will be distributed: by system, by highway district, etc.  It has also authorized the issuance of bonds by the Commonwealth Transportation Board and other entities. However, with few exceptions, the main one being the widening of U.S. Rt. 58, the legislature has stayed away from designating the specific projects to be funded. It has left that function to the Board, relying on guidance from the Virginia Department of Transportation. It was a prudent choice. Otherwise, the funding of specific projects would be largely based on politics, rather than need. Continue reading

Virginia Budget Amendment Could Lead to Lawsuits Seeking Many Inmates’ Release

from Liberty Unyielding

On February 22, Virginia’s progressive House of Delegates removed language from the state’s proposed budget that limited early releases of inmates who committed both violent and non-violent offenses. It removed that language in a 53-to-44 vote, then passed the House’s version of the state budget by a 75-to-24 vote.

If the final state budget also lacks this language, it will be argued that the affected inmates are entitled to be released earlier, including at least 500 of them this year, and thousands more in the years to come. In 2023, the Virginia Mercury reported that 8,000 offenders in Virginia prisons are there for a combination of violent and non-violent offenses, and thus would be affected by this sort of provision.

This provision would allow the affected inmates to benefit from a 2020 law passed by Democrats that released many non-violent inmates earlier by dramatically expanding time off inmates’ sentences for avoiding major prison infractions and participating in prison programs. This time off is known as “earned sentence credits.” Affected inmates who previously received 4.5 days off their sentence for every 30 days they largely complied with prison rules instead got 15 days off . Effectively, this shrank their period of incarceration by nearly a quarter from what they otherwise would have served. Prisons have been emptied as a result: Virginia recently announced plans to close four state prisons in 2024.

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

Boomergeddon Countdown: Ten Years… Nine…

by James A. Bacon

The last time the United States had a serious conversation about deficit spending and the accumulating national debt was in 2010 with the publication of the Simpson-Bowles study. (That’s about the same time I wrote Boomergeddon, predicting that the United States had 20 to 30 years before the fiscal wheels fell off the bus.) After the usual tut-tutting, and Republicans blaming Democrats, and Democrats blaming Republicans, nothing was done. Indeed, in the following era of artificially low interest rates that made deficit spending seem painless, Congress, successive presidents, and the media ignored the issue and deficits ballooned.

Now the national debt exceeds $34 trillion, the debt-to-GDP ratio exceeds 100%, the structural budget deficit is running between $1 trillion and $2 trillion annually, and it will be only a decade before the Social Security Trust fund runs out and sparks a fiscal/political crisis. Political polarization is even worse today than it was during the Obama presidency. Democrats and Republicans accuse one another of sabotaging democracy, and trust in our institutions has reached an all-time low. It’s as if the captain and the executive officer of the Titanic were fighting for control of the vessel, rolling on the deck trying to gouge each others’ eyes out, even as its prow dips below the icy waters.

Meanwhile, there is no cognizance in the political rhetoric here in Virginia of the fiscal perils to come. The Commonwealth is required by its state constitution to balance its budget, and the state has managed to retain its AAA bond rating, so we are not as wildly profligate as some other states. I suppose there will be some temporary comfort in the thought that we were not the first to plunge into ungovernable anarchy when the federal government fails. But that comfort likely won’t last long. Continue reading

But It’s Just a Little Bit of Money

Rep. Ben Cline (Va.-6th District)

by Dick Hall-Sizemore

Ben Cline, the Commonwealth’s Republican member of the U.S House of Representatives from the 6th District, is very upset about the level of federal spending and the state of the federal deficit.

Cline is chairman of the Republican Study Committee’s Budget and Spending Task Force.  In a press release last year, he lamented the trillions in new spending authorized by the Democrats in recent years and the $31.92 trillion in national debt. (He does not mention the trillions in debt rung up during the Trump years.)  The study committee has a proposal that would “balance the budget in just seven years, cut spending by $16.3 trillion over 10 years and reduce Americans’ taxes by $5.1 trillion over 10 years.”

As part of that overall plan, Cline’s task force produced an alternative budget for 2024.  I have to give Cline and the task force some credit.  Usually, when conservatives call for spending cuts, they refuse to say what specific items should be cut or eliminated.  That is not the case with this document.  It has over 120 pages listing specific programs for elimination or reduced funding.  After dealing with Social Security, Medicare, and defense, the budget has about 30 pages of specific mandatory and discretionary spending programs it recommends eliminating or reducing. 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

There’s Gold in Them Thar Hills!

by Dick Hall-Sizemore

As staff members of the General Assembly start looking to “find” money in Gov. Youngkin’s proposed budget bill that can be used to fund priorities of their committee members (and they will be looking—that is a major part of their jobs during the Session), a good place to look would be capital maintenance reserve. There is at least $200 million in that budget item that could be taken without adversely affecting any of the agencies involved.

As defined by the Dept. of Planning and Budget (DPB) in its reporting instructions to agencies, a maintenance reserve (MR) project is “a major repair or replacement to plant, property, or equipment that is intended to extend its useful life.” A typical MR project would be repair or replacement of built-in equipment such as in HVAC systems; repair or replacement of building or plant components such as roofs or windows; and repair of existing utility systems such as steam lines or water systems.

The cost for an MR project must exceed $25,000 but be no more than $2.0 million for a non-roof replacement project and no more than $4.0 million for a roof replacement. DPB may grant exceptions to these dollar amounts and agencies must submit annual reports to DPB on MR expenditures. Continue reading

Sorry, Senator. Zalenskyy is No George Washington

Sen. Tim Kaine

by Kerry Dougherty

Tim Kaine jumped the shark.

Get a load of the nonsense this United States Senator – from VIRGINIA – Tweeted on Tuesday:

President Zelenskyy spoke to the Senate today about the critical role of American support for Ukrainian democracy. He stood beneath a portrait of George Washington, who helped birth an America free from domination by a great power. A moving moment.

— Tim Kaine (@timkaine) December 12, 2023

Seriously, senator?

No member of Congress should ever compare America’s first president with this little corruptocrat.

This is the problem when Virginians vote for a Kansan to represent them in Washington. He missed fourth grade Virginia history and apparently they didn’t teach American history in the schools he attended either.

If they had, the senator would know that Washington was a humble man who fervently believed in freedom and the rights of man. He was an educated, measured leader who stepped down after two terms in office and refused to allow himself to be set up as anything more than a man of the people.

In his farewell address, Washington warned against foreign entanglements.

Presidents have been ignoring Washington’s admonitions for decades, unfortunately. Continue reading