There are portions of the recent state audit report on economic incentives that would warm the hearts of retired Soviet planned economy apparatchiks, sitting around their dachas dreaming of the good old days. Case in point: The analysis concluding Virginia’s use of a single sales factor method to tax manufacturers is “moderately effective.”
The report in question is from the Joint Legislative Audit and Review Commission, and it previously generated mainstream stories about the data center industry and a Bacon’s Rebellion post about grants in the sputtering semi-conductor manufacturing industry. Only ten of the 127 pages (39 to 49) deal with the use of a single sales factor in determining the state income tax owed by a manufacturer. Continue reading
Incentives “spending” reviewed in recent JLARC report. Click for larger view.
The recent report from the Joint Legislative Audit and Review Commission on economic incentives related to manufacturing (here) goes far beyond a discussion of data centers, and if the General Assembly accepts it as gospel some of the existing incentives might be in jeopardy.
Two programs aimed at environmental goals should be eliminated, the staff (and by its vote the full legislative panel) concluded: The Green Jobs Creation Tax Credit and the Green Diesel Fuel Producers Tax Credit. Neither is being used to any extent. Continue reading
According to a story in Saturday’s Virginian Pilot, Virginia Beach is slated for more beach widening this summer. The total cost of the project is $22.6 million, with the federal government providing $14.7 million (65 percent) and the city of Virginia Beach paying the remaining $7.9 million.
The newspaper article says that this project is a “part of a long-term plan to protect the commonwealth’s shoreline from storms.” That sounds like a worthy idea, especially in this era of sea-level rise. But, let’s not kid ourselves. This project is not about protecting the shoreline or about resiliency, the buzzword of the day. After all, if one is going to protect the shoreline and make it more resilient to stronger storms, one would not try to do so by putting down a substance that will start washing away the day after it is put down. The owner of one of the ocean front hotels stated quite plainly the real purpose of the project: “…having a wide beach is important, not only for safety, but for what we’re selling to our guests.”
I do not have an objection to spending public funds to enhance a tourist attraction of the Commonwealth. After all, tourism is one of the state’s largest industries. The Virginia Tourism Corporation reported that, in 2017, tourism accounted for $25 billion in domestic visitor spending, supported 232,000 jobs, and brought in $1.7 billion in state and local tax revenue.
I do have an objection to who is providing the funding for the beach widening. Continue reading
The Hon. Robert Inglis
There is a hotbed of carbon tax advocacy at George Mason University, led by a former GOP congressman sent packing by South Carolina voters because he’s ready to tax them into loving solar and wind. Continue reading
Source: Tax Foundation based on OECD data.
A reminder to all you Bernie Bros out there who think that the U.S. federal/state/local tax system is stacked far more in favor of the rich than in the social democracies in Europe. This graphic based on data from the Organization of Economic Cooperation and Development (OECD), which, incidentally, is not funded by the Koch Brothers, shows that the U.S. relies much more upon individual income taxes and property taxes (thus taxing income and assets) than other nations with advanced economies. Other countries rely more heavily on regressive social insurance taxes and consumption taxes. The Europeans have figured out that they can crank up the income taxes only so high on the wealthy before they pack up and move. Instead they tax consumption.
Expansion tracking on the Virginia DMAS website. Click to expand, web version is here.
Virginia makes is easy to track the growth of Medicaid enrollment since the decision a year ago to expand coverage but tracking the tax dollars behind the scenes is another matter.
The new enrollment expansion dashboard on the Department of Medical Assistance Services website is updated every couple of weeks, with the April 4 report showing just under 260,000 people added to the program since late last year. The City of Salem has added the fewest, only 34 new recipients, while Fairfax County has added the most at 18,220. The advertised goal for expansion was 400,000 persons, so probably there are more to come. Continue reading
The Numbers on Interstate 81: Tax First, Explain Later
When you approve a major tax increase with amendments proposed just a few days before the General Assembly’s reconvened session, as happened last week, discussion is limited and there is almost no hard data on the financial impact available to the public. You tax first and explain later. Continue reading
Digital gold rush. How lucrative are data centers for Loudoun County? The prosperous Northern Virginia county expects to collect $200 million in fiscal 2020 from the property tax on computer equipment, up 35% over 2019, according to the Washington Business Journal. Last week, the Loudoun County Board of Supervisors adopted a $3.2 billion operating budget that featured a “significant cut” to the real estate tax rate, an across-the-board pay raise for county employees, and $100 million more for county schools. Data centers are worth roughly $1,000 a year in lower taxes to Loudoun homeowners.
And at the other end of the fiscal spectrum…
Digging out. In the wake of the worst financial crisis suffered by any Virginia locality since the Great Depression, the City of Petersburg is building back its fund balance, The FY 2020 budget of $75.8 million will run a $2.6 million surplus this year and the city is budgeting for $3.6 million next year. The city still has a long way to go before reaching a fund balance of $18 million, healthy enough to fund the General Fund for three months, but it represents a dramatic improvement since FY 2016 when the fund balance collapsed to negative $7.7 million. Tax and utility payments remain high, but at least the city has a functioning government.
And in the “Them That Has Gets” department… Continue reading
Cigarette taxes rarely yield projected revenues. A Thomas Jefferson Institute for Public Policy study on cigarette taxes in Virginia has found: (1) cigarette taxes produce the most income the year they are imposed, then revenue declines in subsequent years; (2) over the long run, revenues rarely meet projections; and (3) convenience stores and small grocery stores don’t lose just cigarette sales when customers shop for better deals in neighboring jurisdictions, they lose the sale of incidentals. Conclusion: “Any short-term revenue gain often times comes at the expense of a long-term decline in sales and diminished economic activity.”
Baltimore, scandal and violence. The super-prosperous Washington metropolitan statistical area is flanked by two smaller MSAs: Baltimore to the north and Richmond to the south. The core jurisdictions of each, the City of Baltimore and the City of Richmond, have similar demographics and similar challenges with inner-city poverty. But crime-ridden Baltimore is losing population while Richmond, though hardly Nirvana, is gaining residents. The Washington Post profiles Baltimore in an article headlines, “Weary of scandal and violence, Baltimore residents ask: ‘Why do we stay?'” The last time the WaPo paid attention to Richmond was to highlight the police force’s success, one of the best in the nation, in closing out murder cases. The crime rate is a critical variable in inner-city revitalization. Continue reading
Interstate 81. Photo credit: Roanoke Times
The Commonwealth of Virginia has done some smart things in recent years regarding transportation policy. It has established the Smart Scale system for objectively ranking transportation projects. And it has reformed its Public Private Partnership process for attracting private-sector investment without giving away the store. But the assortment of taxes used to fund the state’s streets, roads, highways, and mass transit systems remains an incoherent hodgepodge of subsidies and cross subsidies that only remotely abide by the user-pays principle.
Governor Ralph Northam and the General Assembly kinda sorta took a step in the right direction yesterday by agreeing to new taxes to raise money for congestion-relief projects along Interstate 81, the transportation spine of western Virginia. But we can do better. It’s time for Virginia to seriously consider a Vehicle Miles Traveled (VMT) tax to cover the maintenance cost of the state’s roads, bridges and highways.
Under Northam’s amendments, tractor-trailer registration fees will increase later this year and the diesel tax will increase to 2.03% of the statewide average average wholesale price per gallon. That make sense. Freight carriers dominate traffic on I-81 and they account for disproportionate wear and tear on the highway. Also, according to the Roanoke Times, revenues will be distributed on the basis of truck miles traveled on Interstate highways between the I-81 Corridor Improvement Fund and other interstate projects around the state. Additionally, the gas and diesel tax will increase by way of a 2.1% wholesale tax in the I-81 corridor. All of those revenues will go directly to I-81 improvements. Continue reading
Photo credit: Roanoke Times
Governor Ralph Northam is pitching another plan to raise money for improvements to the Interstate 81 corridor: (1) Increase the statewide diesel tax to pay for transportation projects across the state, and (2) impose a regular gas and diesel tax along the I-81 corridor to raise revenue directly for I-81. The combined measures would raise about $150 million a year for I-81, a fraction of the $4 billion in identified needs, reports the Roanoke Times.
The proposed budgetary amendment comes in response to flailing efforts by lawmakers to find a funding solution for western Virginia’s increasingly congested and accident-prone traffic artery. All previous efforts have floundered because they offended one constituency or another. The root problem, of course, is that everyone wants more money for their roads, but everyone wants someone else to pay.
The political horse-trading approach seems not to be working. Perhaps it’s time to step back from the deal-making and articulate some basic principles that people can buy into in the abstract. If we can gain agreement on the principles, perhaps we can take a fresh look at devising a workable solution. Herewith are some principles worth considering: Continue reading
The so-called Taxpayer Relief Fund to be created with the residual dollars from the 2019 state tax legislation has not seen the first dollar deposited and Governor Ralph Northam is already proposing to spend some of it, seeking to expand the refunds which were part of that bill to all Virginians. Continue reading
Dominion Files IRP Amendments, Cost Scenarios Requested by SCC
Late last week Dominion Virginia Power filed a summary of amendments and additions to its rejected Integrated Resource Plan, along with a legal memorandum arguing with the SCC over what parts of the 2018 Ratepayer Bill Transformation Act are mandates. Dominion, of course, uses its name for the Grid Transformation and Security Act (GTSA).
The provisions of GTSA included add $4.7 billion in capital costs to the plan. (Hence my nickname for the legislation.)
I share this mainly to give interested readers a link to the documents, which will not mean much without careful comparison to the earlier data. The testimony of several Dominion witnesses mentioned is not yet included on the record, and other parties to the case have until April to digest and respond to the new data. SCC staff testimony is due April 16. A hearing is set for May 8. Continue reading
Graphic source: I-95 Corridor Coalition
From a purely economic perspective, the ideal system for funding road and highway improvements would be a Mileage Based User Fee (MBUF) in which motorists would pay in direct proportion to which they use the public road network. Charging for road usage would incentivize Virginians to drive less, thus reducing both congestion and carbon emissions. Plus, an MBUF (also known as a Vehicle Miles Driven tax) would replace Virginia’s increasingly antiquated and jury-rigged system of transportation funding that relies on retail and wholesale gasoline taxes, sales taxes, motor vehicle registrations, and other revenue sources that transfer wealth from low-mileage drivers to high-mileage drivers.
Aside from the fact that such a system would create winners and losers, which would complicate a political implementation, the idea of a VMT tax has been beset by practical issues. How would the technology work and how much would it cost to administer? How could peoples’ privacy be protected? And how does one account for inter-state travelers — if Virginia couldn’t collect the tax from out-of-staters using state roads and highways, would such a system unfairly burden Virginia taxpayers?
But the idea is gaining new respectability. The I-95 Corridor Coalition, a partnership of more than 100 state transportation agencies, toll authorities, and public safety organizations, is exploring the feasibility of establishing MBUFs. If Virginia converted its 22.39 cents-per-gallon gasoline tax and 26.08-cents-gallon diesel tax to an MBUF on a revenue-neutral basis, it would have to charge 1.02 cents per mile. (That compares to the IRS mileage tax allowance of 58 cents per mile.) Continue reading
Only $1.7 of $4.6 billion was diverted back to taxpayers by 2019 law. Final row includes $420 million for one-time tax rebates paid later this year. It was the addition of the Pease Limitation raising taxes on high incomes which reduced the final tax relief total. Sources: Chainbridge Solutions August 2018 report on revenue projections. Department of Taxation on tax reduction estimates. Click to open.
The 2019 General Assembly is a dust storm in the rear-view mirror, but the four state tax increases that were discussed in “Taxaginia” last November are still in the road ahead. This post revises and extends my reporting on their status in this morning’s Richmond Times-Dispatch, featured on the Commentary section front.
In a piece in June 2018 I saw signs the state would keep the state income tax revenue harvest produced by conformity with the federal Tax Cuts and Jobs Act. Turns out that prediction was 60 percent correct, with my calculations showing less than 40 percent of the expected revenue was diverted by tax policy changes. Continue reading