Cruise Subsidy More Important Than Tax Relief?

What is this cruise ship doing in a story about Virginia’s budget and tax fight? Read and learn.

The Richmond Times-Dispatch has obtained and released the most recent negotiating offer from Democrats in the Senate as the standoff between the two political parties over the state budget continues.  It is contained in an on-line article that doesn’t appear to have made it into the print edition yet.

The head House of Delegates negotiator, Appropriations Committee Chairman Barry Knight, was trying to arrange a face-to-face negotiating session with Senate counterparts for Monday. On Wednesday, most of the key legislators will be at the Capitol as Governor Glenn Youngkin (R) releases the formal report on the revenue and expenses for the last fiscal year.

There are two quick takeaways from the document, which for all we know is already obsolete. First, the two sides are really not far apart anymore when you set this side by side with a similar document produced by Knight a couple of weeks ago. Second, the polling done on the topic by Virginia Commonwealth University and questioned in this post was indeed absolute fiction and nonsense.

You will search the Senate document in vain for any reference to $1 billion for “building or repairing schools or other similar projects.” There is absolutely no mention of building or repairing anything school-related, although dollars do flow into more general education categories. The poll authors made up that school construction claim to juice their poll results.

And, as was pointed out in the criticism of the poll, there is not much of an either-or contrast between the two sides of the debate. At this point the positions are very close, so close that compromise should be a simple matter and would be if the Democrats didn’t hate Youngkin more than they love their constituents or care about good governance.

Both the House and the Senate have proposed that the biggest benefit to taxpayers from the state’s embarrassing level of surplus cash come in the form of a one-time cash rebate. Both surely intend to get it distributed before the November election. This is not tax reform. The Senate’s latest offer is revealed to be $200 per person or $400 per couple, which returns more than $900 million to those who paid income taxes (with no reference to how much they paid.)

Both the House and the Senate have also proposed an increase in the standard deduction for this and for future tax years. Here the House has the better offer, with the Senate only offering to give individuals an additional $500 in deduction, and a couple $1,000. That amounts to, at best, a $57.50 tax cut. But it is something that extends into future years, which is what Democrats claimed they opposed doing. Both houses also endorse a change in a business interest deduction with long term impact.

The Democrat term sheet estimates the future year impact of the tax provisions it proposes would be $180 million per year. Knight’s letter from July puts the long-term impact of his proposal at $340 million in future years.

That’s it? The entire set of second-year amendments and other key elements of the FY 2024 budget are hanging fire over a $160 million difference. This year’s General Fund revenue was more than $25 billion. The Democrats are holding everything in the budget hostage because they want to keep an additional six-tenths of one percent (0.006) or less of future revenue from flowing back to taxpayers.

Look though the long list of spending decisions that the Senate included in its negotiation paper, a list of details that the House side has so far omitted. As you look through it, remember those are amounts of increased spending over the existing base budget.

There is $410 million in there for transportation projects that arguably shouldn’t even be part of the General Fund budget. Wednesday’s end-of-year finance report may also include a yet-undisclosed surplus in the non-general fund transportation accounts.

Some taxpayers will look through the rest of the list and nod assent, happy to see those items funded with dollars that otherwise could have been used to lower their taxes. Others will see items they consider frivolous or unnecessary. What all should recognize is this is classic budget politics at its best (or worst), with all the popular themes touched: employee raises, library grants, small anti-crime initiatives, Medicaid provider payments and capital projects sprinkled around numerous legislative districts.

I’m sure lines are already forming for the tourist cruises out of Yorktown to be subsidized by $8.5 million in state funding the Senate proposes. Bets on whether that is a one-time grant or whether it becomes a permanent annual ask, like so many little items in the budget? In fairness, the same proposal may be in the House package as well.