Category Archives: Taxes

Businesses Taxed For Somebody Else’s Layoffs?

Labor Force Participation Rates, March 2021. Source: VEC  Click for larger view. It represents the percentage of population of working age employed or seeking a job.

by Steve Haner

So many Virginia employers faltered or failed during 2020, the remaining companies may be charged a special tax of $95 on each of their own employees in 2022. It will cover the unemployment benefits paid to workers somebody else laid off, the highest so called “pool tax” ever imposed, more than double the amount collected following the previous recession in 2012.

The total unemployment insurance tax (average) may reach $360 per employee in 2022: A base tax of $249, the pool tax of $95 and a special “fund builder” tax of $16. That is more than 50% higher than the previous peak tax in 2012.

The figures emerged this morning as the Virginia Unemployment Commission staff briefed a legislative oversight panel on the financial health of the state’s beleaguered Unemployment Insurance program, swamped by a record number of claims in the COVID-19 recession and hampered by administrative failures in dealing with claims that needed extra attention.

For details, here is the UI Status Report presented today, following the usual format. VEC also provided more information on Virginia’s employment history over time, by region, industry, and locality.  Continue reading

That’s Our Money. Give It Back.

by Kerry Dougherty

We’re rich! Really rich. Rolling in dough kind of rich.

Perhaps you heard: Against all odds, Virginia is ending the fiscal year $500 million in the black.

On top of that, state officials are drooling over another $4.3 billion in federal loot that is expected to drop momentarily.

Wait. There’s more.

Any day now, Virginia should get $6.6 billion from the feds for public schools, childcare, transportation and public health.

Unless my little iPhone abacus is wrong, that adds up to more than $10 billion spilling out of the state coffers.

That sound you hear is state officials clapping their hands as they decide where to blow the money. Continue reading

Protect Taxpaying Virginians From Coming Inflation

Time for a refresher course on the Weimar Republic?

by Steve Haner

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

One of big financial winners with the May 1 Virginia minimum wage increase is the state itself, because the entire raise is subject to a 5% state income tax. With its low standard deduction and personal exemption amounts, Virginia squeezes income tax out of even its lowest wage workers. Continue reading

State Tax Harvest Under Northam Expands Again

by Steve Haner

With the release today of the April 2021 Virginia state revenue report, a correction in an earlier post becomes necessary. Overall general fund state tax collections are not up 26% so far compared to four years ago, they are up almost 30 percent. Corporate income tax collections are not up 68%, but 86% over the same period four years ago.

Your correspondent regrets the error and admits jumping the gun after the March report knowing things would become more dramatic soon. Since the essence of good communication is repetition, expect another update in a month. And as has been the case for a while now, expect Governor Ralph Northam to seek to distract the voters from what is really going on. Continue reading

TCI Debate Rages in Comments on Proposed Rule

by Steve Haner

The political wannabes in both parties and the state’s media are continuing to ignore it, but the argument over the proposed motor fuel carbon tax called the Transportation and Climate Initiative rages in comments on the proposal flowing into its advocates.

The Thomas Jefferson Institute has also launched a short video (above), perhaps just the first, to alert the public through more populist means. It features owners of two regional fuel businesses, well known as major local employers and taxpayers. Without doubt, Virginia’s membership in TCI would shrink and perhaps severely damage those businesses.

The video was actually ready to use had the 2021 General Assembly taken up the issue, but Governor Ralph Northam did not ask for legislative permission to join the interstate compact involved. The state remains involved in the planning for the cap and tax and ration scheme, now set for 2023 in the states who agree to the compact.

If put in place, all fuel Virginia wholesalers would need to buy government-issued allowances to sell gasoline or diesel, in effect a carbon tax. The amount of allowances will be frozen to prevent the any growth in fuel sales, and then decline annually to force down consumption, in effect rationing.  Continue reading

Virginia Taxes New Firms Higher, NC the Opposite

The overall effective tax rate on various kinds of businesses in Virginia, and how they rank against the other 50 states. (Lowest = #1) Click for larger view. Source: Tax Foundation and KPMG LLC

 

by Steve Haner

Virginia is far more tax friendly to established businesses than it is to new ones.  That’s one major conclusion of a major state-by-state business tax comparison released today (here) by the Tax Foundation and KPMG LLC.

In neighboring North Carolina, on the other hand, the tax structure encourages new investment with more attractive rates for incoming businesses of several types. It has been a conscious strategy for that state’s political leaders for some time.

Instead of seeking to put an overall ranking on the state’s business tax climate, as has been done in the past or in other studies, the Tax Foundation devised eight imaginary firms in different industries and then calculated their effective tax rate in each of the fifty states. It used tax laws and incentives as they were in force January 1 of this year.

One of the principal authors is a former General Assembly legislative aide well known around our capital, Jared Walczak, now a vice president at Tax Foundation. This approach of comparing how the various states would tax a set of reasonably typical firms is a big step up from previous methods.  Continue reading

Corporate Tax Already Exploding in Virginia

by Steve Haner

First published this morning in The Roanoke Times.

With Virginia’s fiscal year now three-quarters complete, and basically one year since the depths of the COVID-19 recession, state tax revenues are soaring. Despite reports that the boom results from the economic rebound, it remains clear that changes in tax policy under Governor Ralph Northam are the major driver.

Usually, the state financial reports compare results year over year. Instead, compare the recent data to four years ago. Four years ago it was Governor Terry McAuliffe coming to the end of his term as President Donald Trump began work on what would be his legacy tax bill, the Tax Cuts and Jobs Act of 2017.

In the four years since the March 2017 report, the state’s overall general fund collections to date are up 26%, almost three times the basic inflation rate for the same period (under 9%.) That is an extra $3.35 billion compared to four years ago at the same point. That is just the General Fund, ignoring all the other ways the state taxes us, such as last year’s gasoline tax increases.

About half of the added General Fund revenue came from individual income tax withholding, up 17% or more than $1.5 billion. It is the largest revenue category, so you would expect that to lead the pack. But it leads only in dollars, not in percentage growth.

Corporate income taxes grew 68 % over four years ago. The revenue category that includes the state’s tax on real estate transactions recorded at courthouses was up 72%. State policy didn’t spark the real estate price boom behind soaring recordation taxes. But intentional state policy has increased the corporate income tax harvest by two-thirds, to $315 million more than four years ago.  Continue reading

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. 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.  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