Category Archives: Taxes

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

State Cap on Deductions Added To Tax Bill

The compromise income tax bill hailed for preventing a tax policy train wreck in Virginia includes one new provision not included in earlier bills, not mentioned in any of the Republican press releases and not yet included in any fiscal impact statements.  Democrats wanted it.

It is yet another departure from the new federal Tax Cuts and Jobs Act.  The bill maintains a formula to reduce or cap itemized deductions known as the Pease limit.  TCJA removed the Pease limit at the federal level but the substitute tax bill voted on in committee Friday restores it at the state level.   Continue reading

TCJA Remains A Big Revenue Gain for State

Neither the House nor Senate Republican tax plan returns more than half of the TCJA windfall.  The House GOP does propose to set aside another $517 million in the first year for some form of added tax relief, to be determined later this year.

The tax relief proposals advancing in both the Virginia House of Delegates and Virginia Senate return at most half of the estimated additional state revenue created by the federal Tax Cuts and Jobs Act (TCJA) over six years.

As Virginia leaders have debated what to do about the situation, all have been working off an estimate of the additional revenue provided by an outside economic consultant last year.  It projected $1.2 billion in the first two years and more than $4.5 billion in the first six years as the addition revenue Virginia would collect from conforming to the TCJA, absent changes in Virginia tax policy.  Continue reading

Updates: ACP Customer Charge, M&T, Competition

The following updates three pieces of legislation previous featured on Bacon’s Rebellion. Each headline links to the previous posts for background.

SCC Review of Customer Pipeline Costs

Two legislators flipped their votes from subcommittee and voted no in the full House Commerce and Labor Committee, but legislation to reinforce State Corporation Commission authority to review the costs of natural gas pipelines survived on an 11-8 vote.

Delegate Israel O’Quinn, R-Bristol, and Margaret Ransone, R-Northern Neck, had supported House Bill 1718 but reversed themselves in the full committee vote Thursday afternoon.  Ransone complained that she was now confused about the impact of the bill.  Even more curious, new House Minority Leader Eileen Filler-Corn, D-Springfield, abstained, which normally indicates a financial conflict of interest.   Continue reading

House, Senate Tax Policy Shootout Starts

The Best Friends of the Taxpayer Face Off

The numbers to remember as the Virginia House of Delegates and State Senate start voting on income tax conformity bills, perhaps beginning tomorrow, have nothing to do with the hundreds of millions of dollars on the table or the millions of taxpayers waiting to file returns.

The key numbers are 32 and 80.

With an emergency clause on one of the two House bills, scheduled for debate Thursday, and on the only Senate bill that came out of committee today, a full 80 percent of the members of either chamber need to vote yes or they fail.   Continue reading

20th Century Tax Meets 21st Century Economy

Click for clearer view. The revenue table from the state fiscal impact statement on the internet transaction sales tax bills, about $1 billion over six years.

Both chambers of the General Assembly are on the verge of passing bills expanding the duty to collect state sales tax to internet retailers selling into Virginia, a once controversial idea that is generating far less heat than before but is still hitting resistance.

Senate Bill 1083 and House Bill 1722 still have a few differences that need to be ironed out as the session proceeds, and are proving to be a great example of that famous law of unintended consequences.  Uber Eats, of all companies, is worked up about the bill.  Orbitz keeps expressing concern.   Continue reading

A Rack Of Increases Coming To Your Electric Bill

More rate adjustment clauses (RACs) on your power bill than points on this buck? Soon.

Here they go again, using your electric bill to pay for government spending programs and blurring the distinction between utility costs and taxes.

Everybody heard Thursday about that new coal ash management program adding to the pantheon of rate adjustment clauses (RACs) driving up electricity bills.  Later in the day, with far less notice, a House of Delegates subcommittee approved yet another RAC and allowed potentially major new costs to inflate an existing one.

Continue reading

M&T Fix: A Chance To Win at Whack-A-Mole

Everybody knows (and hates) the car tax, right?  Imagine you bought a six-year-old used car, but when the county sent you the tax bill it based the tax on the brand-new-off-the-lot price paid by the original owner.  Imagine if the Tax Man then smiled and said, this is your annual assessment for the rest of the life of the car, and the next owner pays that, too.

Well, that is what Virginia law does to manufacturers and others who fall under the most insane tax on the books, the local machinery and tools tax.  If a locality chooses, the original price paid by the original owner is the basis for tax forever, even for the next owner of the machine and the next owner after that.

House Bill 2640, which meets its first big test Monday morning in the House Finance Committee, would tax machinery and tools on the price actually paid for them by that business, assuming it was an arm’s length transaction.  The outcry from the various local governments and their associations is an instructive lesson in greed and shortsightedness.

Continue reading

More Like New Jersey Every Year

Source: Tax Foundation

An average tax collections per capita of $4,560 ranked Virginia 23rd in the country for highest state and local tax burden in Fiscal 2016, according to the 2019 Tax Foundation report. That’s up from $4,204 and a 26th rank in Fiscal 2014.

Is it worth it? Are we getting a big bang for our buck, or are we, as the northernmost Southern state, becoming more and more like the Northeastern and Mid-Atlantic states?