Category Archives: Taxes

At Least Some Legislators Dream of Tax Fairness

By Steve Haner

The new chair of the House Finance Committee has introduced a major long-term tax reform proposal that will help most Virginia families, and the former chair of the same committee has offered a significant improvement to it. Both are good bills and combined they are great tax policy.

Delegate Vivian Watts, D-Fairfax, has proposed House Bill 735 to apply an annual inflation adjustment to Virginia’s income tax brackets, credits and the standard deduction. The federal tax code does that, recognizing that without that simple adjustment a progressive tax system becomes more and more regressive over time. Without indexing inflation provides the government with an annual unearned raise and families with a sneaky annual tax hike.

Delegate Lee Ware, R-Powhatan, dropped in House Bill 1717 right on the deadline Friday, to increase the standard deduction used by most Virginia taxpayers from the current $9,000 per married couple to $12,000. That was the standard deduction level recommended in several bills during 2019, and the Assembly did raise the amount – just not that high. It remains a goal of the Thomas Jefferson Institute for Public Policy.

Neither bill has been “scored” by the Department of Taxation, and once their fiscal impact is estimated the outcries from the spending crowd will begin. Were they to pass, there would be a large tax cut in the early years, followed by a general downward bend in Virginia’s future revenue growth. Tax policy should be considered without respect to the appetite for spending, if only because it will never keep up.  Continue reading

Electoral College Vote, Carbon Tax, Labor’s Wants

By Steve Haner

The End of the Electoral College Looms

The legislature’s new ruling Democrats, having celebrated their adoption of the national Equal Rights Amendment, may continue their Constitutional aspirations next week and try to kill the federal Electoral College. Some believe the will of Virginia voters in choosing presidential electors should be overridden by the popular vote total in all fifty states plus the District of Columbia combined.

This idea is known at the National Popular Vote. Objections to the Electoral College process have a long history but were reignited when former Senator Hillary Clinton became the fifth presidential candidate who won the popular vote but lost the Electoral College. As predicted by Bacon’s Rebellion, the proposal to grant Virginia’s votes to the national front runner is back in three bills, with far longer lists of patrons and co-patrons. The two House bills are here and here, and the Senate version here. All now rest with firmly Democratic Privileges and Elections committees.  Continue reading

Be Careful What You Wish For

Judge John Dillon (look familiar to regular readers of this blog?)

by Dick Hall-Sizemore

For the participants on this blog who have longed for the lifting of the yoke of the Dillon Rule from the necks of local governments, major relief is in sight. However, you may not like the area in which it is being contemplated: taxation.

Generally, Virginia counties have less authority than cities and towns to levy certain taxes. Cities and towns have general authority in the Code to levy the following taxes: admissions, transient occupancy, cigarette, and meals. As far as counties are concerned, the General Assembly over the years has given individual counties, as specified in the statutes, authority to levy some of these taxes. In some cases, that authority carries limits and, in the case of the meals tax, it must be approved by local referendum to be effective.

As reported in today’s Richmond Times-Dispatch, legislation has been introduced in both houses of the General Assembly to provide counties the same taxing authority as cities and towns. Furthermore, it seems that these bills have widespread support. Particularly striking is HB 785, introduced  by Del. Vivian Watts, D-Fairfax, chairman of the House Finance Committee, the committee that has jurisdiction over tax bills. Co-patron of the bill is Del. Terry Kilgore, a senior Republican from Scott County. The bill would provide counties general authority to levy these taxes, without any caps or referendum requirement.

If any of these proposals are enacted and your county subsequently adopts a new tax or increases an existing one, you can’t blame those Democrats in Richmond; you need to blame your board of supervisors. And, of course, these measures would not eliminate the application of the Dillon Rule in the Commonwealth. What the General Assembly giveth, the General Assembly can take away.

No $220 Rebate Checks for Military Families?

By Steve Haner

More than 400,000 Virginians failed to receive their $110 “Windfall Income Tax Rebate” in 2019 because, for perfectly valid and acceptable reasons, they didn’t file their returns by July 1.  That allowed the Commonwealth of Virginia to hold onto $46 million more of the un-legislated state tax increase created by conforming to new federal tax rules.

Some undetermined number of those were military families with a Virginia “tax home” who routinely get extra time to file. It could include servicemen and women deployed in combat zones.

Del. Jason Miyares, R-Virginia Beach, had his House Bill 607 all teed up to fix that today in the House Finance Committee. It would have allowed those late filers to get the rebate this year, instead. But the bill was not up for quick action today in order to pass, but in order to die. The Northam Administration was prepared to oppose the bill and seek its defeat, given it blows a hole in the revenue estimates for the new budget. Continue reading

Yet Another Tax Increase Proposal

Del. Delores McQuinn. Photo credit: Richmond.com.

Del. Delores McQuinn, D-Richmond, has submitted a bill, HB 1541, that would raise taxes in Central Virginia by 2.1% on wholesale fuels (about 7.6 cents per gallon of gasoline) and 0.7% on the sales and use tax to fund regional transportation projects.

The taxes would raise an estimated $168 million a year. Fifty percent would be returned to the localities for projects that would “improve local mobility,” including roads, sidewalks, trails, mobility services, or transit; 35% would go to a Central Virginia Transportation Authority; and 15% would be dedicated to mass transit in Planning District 15.

McQuinn said the dedicated funding is critical to improving access to public transportation, especially for low-income residents who have no other way to get to jobs or amenities in the region, reports the Richmond Times-Dispatch. Said she in a meeting with leaders from four localities in the region: “Transportation has become to me almost a civil rights issue.”

A civil rights issue? Wow! I always thought of “civil rights” as ensuring that all Americans enjoyed the same constitutional and legal protections. Now, it seems, the concept of civil rights has expanded to the idea of redistributing income from motorists and consumers, many of them low-income themselves, to trendy priorities favored by urban white elites under the guise of helping minorities and the poor. Continue reading

Virginia Death Tax Would Be Fairly Narrow

by Hans Bader

A few days ago, I wrote about legislation to reinstate Virginia’s estate tax. The Tax Foundation has informed me that the tax contained in the bill would affect fewer households than in most of the states that still have an estate tax. (Most states no longer have an estate tax at all).

This matters, because I incorrectly wrote that the tax would “affect the inheritances of many middle-class people.” Well, it turns out it’s not that many. That’s because the bill indirectly incorporates by reference a $10 million exclusion — even though that is not mentioned anywhere in the language of the bill itself.

As the Tax Foundation told me, after I emailed them my blog post, the bill’s language “could be clearer” about that, and “probably should be,” but it apparently does have the effect of incorporating a $10 million exclusion. So unless you have a relative with $10 million, it probably won’t affect you.

(Because the bill itself did not mention such an exclusion, many commenters at Richmond Sunlight and elsewhere had assumed that it would affect many Virginia households, especially in northern Virginia, where homes are quite expensive, and a typical home in many neighborhoods costs over a million dollars) Continue reading

A Sure-Fire Formula for Chasing Away Affluent Retirees

Source: Tax Foundation

by James A. Bacon

Once upon a time, the Commonwealth had an “estate” tax (paid by the estate of a person upon his or her death) like many other states, but changes in federal law effectively repealed it in 2007. There has been no serious move to reinstate the tax in Virginia until this year. Now Sen. Scott Surovell, D-Mount Vernon, and Del. Vivian Watts, D-Alexandria, propose to reimpose the tax with exemptions for closely held businesses. (See Hans Bader’s description of the tax here.)

It’s hard to know how seriously to take the prospect of a death tax in Virginia. Are Surovell and Watts off in left field, all by themselves, or is there quiet by widespread support for their idea? We’ll find out as the 2020 General Assembly session rolls on. In the meantime, it’s not too early to begin discussing the pros and cons of the tax.

I acknowledge that the death-tax debate cuts many ways. As a libertarian-leaning conservative, I am uncomfortable with the idea of an aristocracy of wealth perpetuating itself through inheritances. But I’m even more uncomfortable with the idea of social-engineering zealots deciding who gets to keep their wealth, and how much they get to keep. Those moral questions are interesting but, to my mind, secondary to the practical, real-world impact on wealth creation and the generation of tax revenue here in Virginia.

Here’s the bottom line: As long as the United States is a federal system of 50 states, the states will compete to attract wealthy people, the jobs they create, and the tax revenues they generate. A death tax in Virginia would incentivize wealthy residents to relocate to states that have no death tax. Continue reading

2020 Assembly May Not Vote on Carbon Car Tax

By Steve Haner

It now seems unlikely the 2020 General Assembly will act directly on Virginia’s membership in the proposed Transportation and Climate Initiative, an interstate compact to cap, tax and then start to ration fossil fuels that add carbon dioxide to the atmosphere. Virginia would be the southernmost member.

While six pieces of pending legislation (so far) mention the similar Regional Greenhouse Gas Initiative, which caps, taxes and rations CO2 from power plants, the silence continues on TCI. It has been conspicuously absent from gubernatorial pronouncements on these issues. A Virginia Mercury story this week on various environmental proposals cited a December statement from him that “no decisions have been made,” although it wasn’t clear on what.

When organizers of the TCI compact released their draft memorandum of understanding last month, they clearly were pointing to action in the various states in the near future. But the MOU itself is only an outline, with many blanks to fill in. An argument that the issue is not ripe for the legislature could be valid. What is the actual goal or schedule for forced supply reductions?

An argument that it doesn’t need legislative blessing at all, however, would not be valid. Virginians should not be subjected to this tax, cap and ration regime without a recorded vote by their elected representatives.

What people can do now, if they care, is register an opinion with the TCI organizers on their public input portal. Their last round of comments included many who dislike this idea, so they are asking again now that more details are out.

Continue reading

The 20% Growth Claim Is Not Misleading

HB 30 Appropriations Total As Introduced
Year Grand Total ($Billions) % Over Previous % Over 2010
2010 77
2012 86 12 12
2014 97 13 26
2016 109 12 42
2018 116 7 51
2020 139 20 81

By Steve Haner

As I noted earlier, defenders of state spending growth have a number of tools and tactics handy to confuse voters, but facts are stubborn things.  So, I’m going to explain a bit further how this proposed budget grew 20% over its predecessor in just one two-year cycle, with some context. The table above should help.

Virginia sets its state budget for two years at a time, with a new two-year spending plan introduced in December of every odd-number year and considered in the session that follows in the even numbered year. 2020 is a budget year. For convenience, the bills are always House Bill 30 and Senate Bill 30. In December, Governor Ralph Northam did as his predecessors have done for decades and published his budget.

In the opening summary, known as the enacting clause, there are tables that always end with a grand total for all proposed spending from any and all categories. The number I’m using is right at the end of that. Note, I am not using the higher revenue estimate – just the proposed appropriations.

The introduced budget is just that, and the General Assembly will change it. It will add new spending based on higher revenue estimates (or cut, if the estimates collapse in the February recalculation.) It may create new revenues by changing tax laws or creating other revenue streams, as happened with the Medicaid expansion funded by new assessments on hospital revenues. Continue reading

Death Tax Proposed for Virginia

by Hans Bader

Lawmakers in both houses of Virginia’s legislature have proposed an estate tax. That’s a tax on what residents own at the time of their death. The proposed tax, set at hefty rates not seen since the 1970s, would affect the inheritances of many middle-class people.

Virginia had an estate tax until July 2007, when the Republican-controlled legislature allowed it to be effectively repealed. But this year, the Democrats took control of both houses of the Virginia legislature. And two Democratic lawmakers promptly proposed reinstating and increasing the estate tax, to a higher level than in 2007.

The tax is contained in two bills: SB 637, proposed by Sen. Scott Surovell, D-Mount Vernon, and HB 736, sponsored by Del. Vivian Watts, D-Alexandria.  (The bills would exempt “closely held businesses” to avoid decimating small businesses on the owner’s death.)

The tax is not set to the level of 2006 or 2007, when few American estates were even subject to the death tax, and tax rates were not at their peak. Instead, it would be set as it was back in the 1970’s, when estate taxes were at their most burdensome and affected the largest number of middle-class households. Continue reading

A 20% Budget Explosion That May Keep Growing

The new spending over the next two years by major category. This is for the smaller $48 billion general fund. No such pie chart was published by the Department of Planning and Budget for the combined $139 billion full budget.

By Steve Haner

The interesting thing is not how Virginia’s overall budget has grown 20% in just two years (seen that number reported anywhere else?) What’s interesting is how many interest groups are openly pushing to make it even larger. The $23 billion increase is not enough!

Just two years ago, in December 2017, Governor Terry McAuliffe dropped in his proposed budget for the budget cycle we are still in, Fiscal Years 2019 and 2020.  Before the 2019 General Assembly worked its magic, the baseline two-year total for spending he proposed was $116 billion.

Comparing an apple to an apple (which the political class discourages) the equivalent figure for the budget Governor Ralph Northam published last month is $139 billion, growth of $23 billion or 20%. That is the general fund and the non-general fund combined. It becomes more and more obvious that the non-general fund is the cart pulling this horse. At $90 billion over the next two years, it is almost double the proposed $48 billion general fund. Soon it will be more than double.  Continue reading

The Wildest Energy Whirlwind Ever is Underway

by Steve Haner

If Bacon’s Rebellion at times has been “Dominion Pravda,” providing a window into that corporate giant’s C suite, our friends at the Virginia Mercury sometimes take the opposite role of “Environmental People’s Daily.”

Its story today is a good example, for what it includes and what it does not. The long, detailed and worthwhile summary of energy and environment issues coming to the 2020 General Assembly has a glaring omission. It makes no reference to the Transportation and Climate Initiative. If anybody could get a straight answer out of the Northam Administration, you’d think it would be Virginia Mercury. The silence is deafening and perhaps significant.

At some point soon somebody has to say something, wouldn’t you think? In others states in the proposed interstate compact, governors are being pinned down, actual TCI bills are pending, legislators are taking positions, coalitions are forming. This will have to happen in Virginia soon if the organizers of TCI want their proposed memorandum of understanding signed by enough states to actually impose the carbon caps and taxes by 2022.  Continue reading

After Santa Comes Carbon Tax Sugar Daddy

by Steve Haner

The Virginia Secretary of Natural Resources will be the sugar daddy for the carbon tax dollars raised from electricity customers, according to pending legislation to fully enroll Virginia in the Regional Greenhouse Gas Initiative (RGGI) next year.

House Bill 20, sponsored by Norfolk Democrat Joe Lindsey, is similar (with some changes) to 2019 legislation which died on a partisan vote when Republicans controlled the General Assembly. Now that power has shifted the bill’s chances of passage are excellent. It has several unusual provisions and may hint at how the related Transportation and Climate Initiative will be implemented in Virginia. Continue reading

The Carbon Car Tax Nobody Is Discussing

By Steve Haner

So far there appear to be about six schemes before the 2020 General Assembly to save the Earth and its inhabitants from the fiery holocaust of climate catastrophe. The one that is going to cost you the most money in the shortest period of time is still missing in action. Finally we have details, but not from anybody in Richmond.

The organizers of the Transportation and Climate Initiative (TCI) met and held a streamed webinar in Washington, D.C. Tuesday, releasing their long-anticipated draft memorandum of understanding and quite a bit more information about the impact of this new carbon car tax. See the slides here. Does a starting bid of 17 cents per gallon on gasoline get your attention? Do not confuse this with the separate proposal from Governor Ralph Northam to add 12 cents onto the existing state excise tax.  Continue reading

Taxpayers “Clinging” to their Income in a Moderately Taxed State

Click to enlarge image. Data source: USGovernmentRevenue.com

by James A. Bacon

In his budget roll out yesterday Governor Ralph Northam proposed hikes to tobacco and gasoline taxes and a clawback to taxpayer relief fund enacted last year in response to changes in the federal income tax code — an increase in the tax burden well in excess of a half billion dollars a year. (In none of the articles and documents I’ve seen have I been able to locate a full tally — gee, I wonder why.)

In his presentation to the Joint Money Committees of the General Assembly, the governor made a revealing comment.

“Here in Virginia, we pride ourselves on being a low-tax state,” he said. Then, in the context of the tobacco tax, he added, “But it makes no sense to cling to the bottom of the rankings that costs us so much.”

“Cling.” Interesting word choice. At least Northam didn’t refer to taxpayers as “bitter” clingers.

It is true that Virginia has lower-than-average gasoline taxes and the second lowest tax on tobacco products. But the Old Dominion also had the 10th highest income tax collections per capita and 17th highest property taxes, according to the Tax Foundation based on 2012 data. Add it all up, and Virginia’s total state/local tax revenue as a percentage of state income ranked 27th in the country. That’s not a “low” tax state in my book, it’s a “moderate” tax state. Continue reading