Category Archives: Taxes

TCI Model Rule Ready for Study, Comment

by Steve Haner
First published this morning by the Thomas Jefferson Institute for Public Policy.  (Happy birthday, Mr. President.)

Read the governing document for the Transportation and Climate Initiative and it becomes clear there is more going on than just an effort to reduce motor fuel use with a combination of taxes and shrinking caps. That may really be a secondary goal.

How would TCI regulate and change the motor fuel business in Virginia, should the state decide to join in 2022? What are the initial carbon taxes likely to be? Some details can be found in a draft model rule published March 1 and now subject to an open comment period through May 7.

You can find the 153-page model rule here. There is an open portal for any public comments you wish to provide, and you can also find summaries of the comments filed to date. Certainly, all fuel wholesalers and retailers and businesses dependent on transportation need to study this document and the regulatory structure it creates.

The Rhode Island and Connecticut legislatures are currently considering legislation on TCI. Massachusetts intends to join with its governor claiming he already has authority to sign the interstate compact.  If Virginia joins in 2022, that is still in time for it to be in on the first carbon dioxide emissions allowance auction in 2023.  Continue reading

Fairfax County Should Be Renamed Fairtax County… Er, Make that Unfairtax County


Sales prices for houses have been soaring across the country — by double digits in many metropolitan areas — and so are real estate property assessments. When assessments go up, so do taxes, unless city councils and county boards lower tax rates. In the current environment, holding a tax rate steady amounts to a tax increase. Even a 5% reduction in the tax rate can amount to a tax increase if assessments are up 10%.

The Fairfax County Taxpayers Alliance has a few things to say about the long-term trend in Virginia’s most populous locality: Continue reading

May Day Brings Virginia’s Labor Revolution

“Liberty Leading the People,” Eugene Delacroix.

by Steve Haner

Four major changes in Virginia’s labor laws delayed at the beginning of the COVID-19 recession will all take effect May 1. All were approved by the 2020 General Assembly once Democrats controlled both legislative chambers and then delayed at the 2020 Veto Session. May Day 2021 is almost here.

Minimum Wage. The 31% increase in the state’s minimum wage, from $7.25 to $9.50 per hour, will have the broadest impact. House Bill 395 and Senate Bill 7 also raised the hourly minimum wage to $11 eight months later, on January 1, 2022, and to $12 a year later on January 1, 2023.

The bills outline two further increases, which go into effect only if the Assembly votes for them again: To $13.50 per hour in 2025 and then the often-touted $15 per hour in 2026 (by which time that will be considered inadequate.) From there the rate will automatically adjust upward annually for inflation, a consideration never offered to taxpayers when inflation raises their taxes. Continue reading

Unthinkable–a Tax Decrease!

Patrick Duhaney,City Manager, Virginia Beach

By Dick Hall-Sizemore

According to a report in the Virginian –Pilot, the city manager of Virginia Beach will be recommending that city council reduce the city’s real estate tax rate. He is also recommending that the city delay a previously approved storm-water fee increase.

Last year, the city cut $67 million out of its operating budget in anticipation of COVID-19’s impact on the economy. The impact was not as bad as anticipated and revenues have stabilized. Even with the proposed cut in the real estate tax rate and the delay in the storm-water fee, resulting in a loss of about $9.3 million, the manager projected enough revenue in the budget to recommend 3% salary increases for city employees and the approval of 54 new positions, primarily firefighters and emergency responders.

The fiscal condition of the city of Virginia Beach is not typical of that of other Virginia local governments and there are probably few, if any, others who could afford to take these steps. However, the city is an example for most of the contributors and commenters of Bacon’s Rebellion that governments are not always trying to get as much out of the taxpayers as they can.

Virginians’ Money and Our Tax-Exempt “Public Charity” Healthcare Monopolies

The Business of Healthcare

by James C. Sherlock

A generally accepted rule of thumb for the minimum profitability required for a hospital to maintain operations and fund its future is 3%.

Virginia’s community hospitals as a group in 2019 had an operating margin of 10%. Most of them are filed with federal and state governments as not-for-profit public charities and are untaxed at any level of government.

I yesterday wrote a  column that disclosed 34% increases in the 2019 profitability of Virginia hospitals that were generated by taxpayer funds sent directly to the hospitals through Medicaid expansion and increases in Medicaid payments passed by the General Assembly in 2018.

There were several good reasons for Medicaid expansion. Better access for the poor. Financial stability for rural hospitals. I was for Medicaid expansion myself, and Republican votes put it over the top. Continue reading

Troubled Governance at Sentara

Sentara Martha Jefferson Hospital

by James C. Sherlock

I have been studying and writing about Sentara Healthcare for 15 years. Sentara has during that time both expanded significantly and been mired in seemingly endless controversies regarding such widely reported issues as:

  • its death grip on the COPN process and business practices, which together have strangled their much weaker competitors in Hampton Roads;
  • its captive HMO Optima Health, which in 2018 raised ACA Individual Policy rates to the nation’s highest in Charlottesville and Albemarle County when Anthem pulled out of that market for a year and left Optima offering policies on the exchange. The severe financial distress to individual policyholders made headlines all over the state;
  • the ongoing reporting of conflicts of interests by a Circuit Court judge who had served as a Sentara attorney before sitting and ruling in favor of Sentara;
  • fierce pressure applied in the courts on people who could not pay their medical bills before the publicity and subsequent state and federal pressure effectively stopped it;
  • a senior Sentara executive threatening political retribution against a member of the Virginia Senate;
  • secret negotiations among Sentara, ODU, and a powerful group of businessmen in Hampton Roads to dump Eastern Virginia Medical School (EVMS) onto the taxpayers and take its profitable physicians practices; and
  • other headlines too often reporting unseemly activities.

Those issues indicate poor executive leadership, ineffective board governance and a toxic culture.

I recently completed a private study of the corporate architecture of Sentara to see what might be in its DNA that produces such results. Consider this an analyst’s note to shareholders, the public served by Sentara. Continue reading

Surprise! State Underestimated Carbon Tax Cost

by Steve Haner

Virginia has collected its first wave of carbon taxes from the state’s electricity generators, costs which will eventually show up on future bills. The $43.6 million take just about doubles the revenue estimates used when participation in the Regional Greenhouse Gas Initiative was being approved by the Virginia General Assembly last year. Surprise!   Continue reading

Virginia’s Progressive Assembly Turns to Taxes

by Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy. 

The COVID-19 recession barely dented Virginia’s state budget. The massive spending growth adopted in the pre-COVID budget a year ago is largely back on track. Yet some legislators think the time is ripe to hunt for more revenue by re-writing the state’s tax code.

The two-year $48.2 billion General Fund revenue estimate endorsed by the General Assembly Saturday is less than $200 million lower than the comparable figure a year ago, a rounding error in a $143 billion overall budget. There is every reason to believe the current tax estimates will prove too low as another round of federal stimulus revs the economy in coming months.  Continue reading

Updates: PPP, PIPP, Dominion’s School Buses

by Steve Haner

Tax on Paycheck Protection Program Grants

The General Assembly session deadlines require final decisions on various revenue bills before the final budget bill is adopted, in theory keeping the two issues separate. What is good tax policy should not be driven by the need or greed of the appropriators.  Continue reading

Should Virginia Rebuff the HUF?

Rav4 hybrid — paying its fair share

by Bill Tracy

There’s a new Virginia tax called a HUF — for Highway Use Fee.

Who knew? Not me — until I had to pay it.

If you renew your Virginia vehicle registration, and your car exceeds a 25 miles-per-gallon EPA rating, you will be politely advised that you are underpaying pump taxes, and to be fair, you will be assessed an extra fee. In my case, I owed an extra $35 taxes because my new RAV4 Hybrid gets 40 MPG.

Because my wife and I do not put on many miles in retirement, and with COVID, that means I probably now pay a little more combined Virginia pump tax with my RAV4 Hybrid than I would with a non-hybrid RAV4. Not to mention significantly more annual car tax to Fairfax County. Continue reading

Dominion Electric Bus Scheme Back, With More

EV School bus? Storage battery? No, utility profit center.

by Steve Haner

First published this morning by Thomas Jefferson Institute for Public Policy.

The ultimate goal of the Transportation and Climate Initiative with its tax and rationing scheme is to eliminate fossil fuels for transportation and get us into electric vehicles. That is something advocates have admitted and critics have pointed out. While Virginia TCI participation is on hold in this statewide election year, the 2021 General Assembly is following other pathways to the utopian EV future.

The House of Delegates has sent the Virginia Senate a bill to create a state financial incentive of $2,500 for purchase of a new or used electric vehicle. An additional $2,000 rebate is offered to a low- and middle-income buyer of a new car and $500 if that buyer choses a used EV.

The House has also passed legislation empowering the state’s Air Pollution Control Board to adopt state regulations on vehicle fleet fuel economy and to model California’s existing program forcing manufacturers to offer more zero- and low-emission vehicle sales in the state. This bill sets no goals but puts an accelerated process in motion, bypassing the full regulatory review, with a goal of regulating the 2025 model year vehicles offered in the state. Continue reading

Senate Taxes Less PPP, House Bill Almost All

by Steve Haner

First published this yesterday by the Thomas Jefferson Institute for Public Policy.

Majorities in both chambers of the Virginia General Assembly agree with Governor Ralph Northam and have voted to tax the federal Payroll Protection Plan grants that saved Virginia jobs in the pandemic. They only remain at odds over how much to tax.

The Virginia Senate has passed a bill 39-0 that allows employers, who used the money to maintain their workforce, to exempt the first $100,000 of their PPP grant from 2020. The rest is taxed. The bipartisan compromise allowed the bill to pass with the emergency clause it needs to go into effect immediately upon approval, in time for this tax filing season.

The average Virginia PPP grant was about $107,000, state officials reported. More than 20,000 employers would still see some taxes on their grants under the Senate bill. This state and its localities have received multiple billions of dollars of direct federal funding during the COVID pandemic, with more on the way, yet Governor Northam also wants to skim 6% off the top of what Virginia employers received.

It is that simple. Continue reading

Federal COVID Funding to Virginia K-12 Schools

by James C. Sherlock

The federal government allocated a great deal of money in each of two different pieces of legislation in 2020 to provide COVID-related relief to K-12 schools.

I will endeavor here to explain briefly what that means to Virginia.

The two pieces of 2020 federal legislation that provide funding to K-12 schools were:

  • Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020; and
  • Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSA) signed into law on December 27, 2020

Two of the major program elements under each of those two bills are :

  • Elementary and Secondary School Emergency Relief (ESSER and ESSER II) funding – Virginia’s allocation is $1.2 billion dollars, 90% of which is to be sub-allocated by formula to school districts.
  • Governor’s Emergency Education Relief (GEERS and GEERS II) funding – $132 million to be allocated to the neediest public schools and non-public schools at the Governor’s discretion.  Money for the Emergency Assistance for Non-Public Schools (EANS) program is part of the Governor’s Emergency Education Relief Fund.  Virginia’s EANS allocation was $46,618,019. For comparison, total Virginia K-12 school spending from all sources was estimated by the NEA at $17.8 billion in 2018-19.

By way of comparison, the federal government sent $1 billion to Virginia for K-12 schools in 2019, including big money from the Department of Agriculture for the National School Lunch program ($247 million) and other non-educational programs, so the 2020 COVID supplementals already exceed the original annual federal appropriations for Virginia. Continue reading

State Tax on PPP Grants Reduced Only Slightly

by Steve Haner

A Senate Committee voted today to reduce the amount of tax that Virginia will impose on the Paycheck Protection Plan (PPP) grants that saved Virginia jobs, but not by much. It remains clear many legislators think employers owe Virginia tax on those dollars.

Declining to tax the entire amount is being packaged as a gracious concession on the state’s part.  Continue reading

PPP Tax May Focus on Larger Employers Only

by Steve Haner

A week ago, Governor Ralph Northam’s Administration was adamant that it would be unfair, in fact a double tax benefit, to allow Virginia employers with forgiven Paycheck Protection Plan loans to also deduct any expenses used to qualify for forgiveness.

This week, the position changed. Maybe it would make sense to allow it for some employers. Perhaps those employers could keep the first $100,000 from the grants free from tax. What was a firm assertion of fair tax policy is now a typical legislative horse trade, with smaller businesses considered “deserving” and larger businesses not.

Northam and his secretary of finance, Aubrey Layne, built the introduced state budget on a key assumption: Any Virginia employer that received some of the $12 billion in PPP money which flowed into Virginia, and had that loan forgiven, would be denied a tax deduction on the expenses which qualified it for forgiveness. (Mostly employers qualified by keeping employees on the job, so the deduction would be payroll dollars that supported them and their families.) Continue reading