Dump the Nonsense in Coming Conformity Debate

Mr. Chairman, I seek permission to revise and extend my remarks – in this case a guest column in today’s Washington Post on the topic of income tax conformity.

For about a month now the inbox has been filling up with nonsense (and some wisdom) from across the political spectrum over the causes, impact and possible corrective actions to the side effects federal tax reform had on Virginia’s taxes because Virginia is a conformity state.  There is an annual bill dealing with income tax conformity at the General Assembly, but based on what has been coming out, few who voted for it have paid any attention to it.

“Governor Northam recently announced a new tax plan that will result in a large tax increase on middle class families. That means more money out of your pocket,” was the message in a recent Republican fundraising appeal.  The only hint of accuracy in that is that Virginia Governor Ralph Northam has proposed Virginia continue its long and bipartisan policy of conformity with the tax laws passed by Congress, in this case a tax bill written by their fellow Republicans.

If the position of the Republicans in the House of Delegates is to abandon Virginia’s long (and wise) policy of tax conformity, they should just say so.  They  are painting themselves into that corner.  You’ll notice no similar noises have come from the state Senate.

More than 30 years ago I was writing the political rhetoric following the Reagan-era tax reform, which had a similar impact on state taxes because of conformity.  Our immediate call as Republicans was to prevent a windfall tax increase at the state level, to “give it back to those who paid it.”  We even went so far as to accuse Governor Gerald Baliles of playing Robin Hood, taking from the rich to help the poor.  I should have looked up Robin Hood’s Q score.  People love Robin Hood.

As my education on the issue continued it became obvious our stated goal was impossible, given the complexity of the tax code.  The bill that eventually passed produced tax reductions, but was not intended to cancel out every individual tax hike.  It was not possible then and is even less possible now.

This is complicated stuff,  just like my other favorite topic of electricity regulation.  But taxes really get people riled up, adding the emotional content.  Fairness?  Fairness in this realm is entirely subjective. If you are going to pick a hill to die on, pick one you can actually find.  

The eagle-eyed among you will see a new title for me mentioned in the Post’s intro.

I have accepted an invitation to affiliate with the Thomas Jefferson Institute for Public Policy as a senior fellow.  Those of you who know it and founder Michael Thompson know it is a pro-business, pro-growth policy shop that does not engage in lobbying or partisan politics. It does have a point of view.  It has long been an advocate for a deep examination of the state and local tax structure, seeking to make it more aligned with the modern economy and more competitive compared to other states.  This is another chance to do that.

We hope to add some depth and detail to the debate, balancing opposing but equally important viewpoints, because a good outcome is crucial to the Commonwealth’s economic future.  The institute has access to an economic model that might prove useful in the debate, a counterweight to the data the state obtained from Chainbridge Software LLC.

I have asked that any financial support received for this effort, which may pay for that modeling, be as transparent as possible.  Any policy goals of the donors or others affiliated with the Jefferson institute will not overcome my own opinions on these issues, formed over forty years of writing and lobbying on taxes and budgets.  I also intend to continue exploring a wide range of additional topics here on Bacon’s Rebellion.