Category Archives: Taxes

Medicaid: Report The Taxes Along With The Growth

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

Bacon Bits: I-81 Taxes, VCCS Shrinkage, Solar

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.

The details appeared at this week’s meeting of the Commonwealth Transportation Board, which was given some charts on the six-year revenue and spending projections behind Governor Ralph Northam’s successful amendments. About 41 percent of the anticipated $1.5 billion over six years will support Interstate 81 projects, just a start on the $2 billion in planned improvements to that congested artery. Almost 60 percent is not for I-81. This is not a fix for I-81, but is something bigger than a Band-Aid.  Continue reading

Bacon Bits: Highs and Lows

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

Bacon Bits: Taxes, Crime and Schools

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

After I-81 Tax Compromise, Time to Talk VMT Tax

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

How to Fund I-81 Improvements: Six Principles to Consider

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

Sure, Give The Money To Everybody. Why Not?

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.

The Richmond Times-Dispatch story on the proposal, which you can read here, quotes state officials as pegging the cost at a modest $18 million, with 98 percent of the recipients being exactly the people Northam sought to reach with his proposal to make the Earned Income Tax Credit into a grant program.   Continue reading

Updates: IRP Amendments, Utility Tax Cuts

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

New Momentum for Mileage-Based User Fees

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

Back to Taxaginia: Add A New Wealth Tax

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

Amazon Local Incentives Not Worth A Revolution

Artist rendering of possible Crystal City to Reagan National Airport pedestrian bridge. Source: Crystal City Business Improvement District.  Click for larger view.

One of the self-styled revolutionaries seeking to prevent Amazon from planting its second headquarters in Arlington County complains the local incentive package offered is $23 million.  A research fellow at the Mercatus Center at George Mason University puts the total at $51 million.  The actual monetary value is elusive and still to be determined.

Both critics appear in a story from the politically-charged “news” outlet The Blaze, showing Amazon’s local incentives are national news.  So far, the much-larger state package, now approved by the 2019 General Assembly, has been the focus.  That was before a band of New Yorkers spit out their piece of Amazon Pie, inspiring Northern Virginians of similar ideological bent to step up a local battle.

UPDATE (2 p.m.):  The Arlington Board of Supervisors is set to vote on its agreement with Amazon on March 16, and here is the draft of the contract, just posted.  Continue reading

Tax Break Powers Opposition To Huge Solar Farm

If the East Coast’s largest solar generation facility, proposed for Spotsylvania County, is rejected by its Board of Supervisors this week, one of the reasons will be the major tax advantages sought by that industry and granted by the General Assembly.

The tax exemption is at the heart of the final argument put forward by one of the opponents in Sunday’s Fredericksburg Free Lance-Star:

“Put plainly: Future tax revenues are going down, not up, if the project goes forward. A current estimate is that this $600 million project will only generate some $8 million over its lifetime and, as shown below, our current incremental expenses greatly exceed that,” wrote Alfred King, who lives in a neighboring subdivision but carefully avoids any not-in-my-backyard rhetoric.   Continue reading

Taking Some Pain Out of Eminent Domain

Senator Frank Ruff of Clarksville. Taking some of the pain out of eminent domain.

Four successful bills heading for Governor Ralph Northam’s desk may combine into a measurable shift in Virginia’s condemnation laws in favor of the targeted landowners.  They may also spark a race to the courthouse between now and when some go into effect July 1.

The biggest financial impact may come from Senator Frank Ruff’s Senate Bill 1256, which eliminates state tax on any capital gain resulting from the forced sale.  The subtraction for any capital gain applies to both individual and corporate landowners and applies to any transaction after January 1 of this year.  Too bad if you took that check in December.   Continue reading

Three Lessons From Dominion’s Income Tax Case

If you thought the tax conformity debate took too long at the General Assembly, check out the fight at the State Corporation Commission over Dominion Energy Virginia’s corporate income tax bill.  The SCC still hasn’t decided how much to cut Dominion’s base rates to reflect its lower income tax payments, but a decision is close.

There are three reasons why this case is worth exploring.   Continue reading

Revised Again, Tax Bill Envisions Future Reforms

The possibility of additional future state tax reform or tax cuts improved Monday under a new version of the pending bill that puts Virginia into conformity with the federal Tax Cuts and Jobs Act.  The resulting tax revenue not returned by the modest policy changes in this bill are to be held in reserve for future action.

The language in the bill now better matches the earlier rhetoric about preventing a huge inflow of new income tax revenue.

The legal reality is no General Assembly can bind a future one, so the 2020 session could disband this new fund and just spend the money.  But it is a stronger statement of policy and intent, and perhaps will add focus to the debate over tax policy which is inevitable in the 2019 legislative elections.  Continue reading