More Evidence that Virginia is Becoming New Jersey….

by James A. Bacon

Governor Ralph Northam is one of seven governors earning an “F” grade for fiscal policy by the Cato Institute in its 2020 “Fiscal Policy Report Card on America’s Governors” report. With that score, he enjoys the company of such gubernatorial luminaries as Governors Phil Murphy of New Jersey, Andrew Cuomo of New York, and J.B. Pritzker of Illinois.

Cato, a libertarian think tank, grades the governors on the basis of seven metrics reflecting taxes and spending during their tenures. Here is Cato’s commentary on Northam:

Northam receives an F because of his low scores on both taxes and spending. Virginia’s general fund spending increased 4.9 percent in 2019 and 6.1 percent in 2020. In 2018, Northam approved the expansion of Medicaid under the federal ACA. To pay for the expansion, Northam approved two new assessments on hospitals that together will raise more than $500 million a year.

Northam has raised other taxes. In 2019, he signed a bill to conform to the broader federal income tax base under the TCJA. For the first year, Northam agreed to a Republican plan to return the increased revenues to taxpayers through a rebate, but in later years Virginians will owe more than $400 million more in annual taxes.

In 2020, Northam approved two large tax increases. He signed into law a statewide gas tax increase of 10 cents per gallon and additional increases in some regions of the state, combined with higher vehicle fees to raise about $250 million a year. He also signed into law a cigarette tax increase of 30 cents per pack to raise $120 million a year. Northam’s F on this report is well deserved.

On a 1-to-100 scale (with 100 being the best in Cato’s reckoning), Virginia scored 37 for spending and 33 for revenue.

It could be worse. Washington Governor Jay Inslee earned scores of 4 for spending and 0 for revenue. Cato describes Inslee this way: “His appetite for spending increases is insatiable, and paying for all the increases has driven him to push nonstop for tax hikes.”

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32 responses to “More Evidence that Virginia is Becoming New Jersey….

  1. James Wyatt Whitehead V

    At what point will Virginia’s tax and spend policies impact our ability to attract business and start ups?

    I would have never expected to see Iowa at the top of the list with A.

  2. I am working, in various capacities, on three start-up ideas now. I’d bet that at least one, perhaps two, will launch. None of the three will be based in Virginia. Virginia is becoming New Jersey and none of the startups would be based in New Jersey either.

    • Can you say why they will not be based in Virginia?

      • Because neither the other founders nor I believe that we can attract and retain top talent in Virginia. The only place with enough talent to ensure that we have access to the skills we need is Northern Virginia. Nowhere else in Virginia is even a consideration. I don’t say that to be disrespectful but when you need to hire a distributed database expert you have to be somewhere where distributed database experts are in sufficient quantity. NoVA (plus DC and suburban MD) is the only place in Va with the quantity of skills. Meanwhile, the high cost and poor quality of life in NoVa is a major turn off for techies. You hire a tech expert away from a government contractor and keep them long enough for them to realize they don’t have to be in NoVa and presto – they’re off to Raleigh or Austin. Richmond has robbed NoVa for so long that people with highly in-demand skills don’t want to be here unless they are working for the government.

        Among the founders – we have no interest in starting something in a state that is clearly going in the wrong direction politically and economically. All of us plan to relocate in the mid term anyway, partly to avoid the ever escalating taxes (with no improvement in quality of life). It’s a whole lot more fun to sell a company (or recover dividends from a company) while living in a no income tax state than while living in Virginia.

        • Virginia needs to change their capital gains tax law to make capital gains from selling one’s home taxable at 50% UNLESS used to purchase another home, which MUST be located in Virginia.

          See, I can think like a Richmond bastard.

        • The quality of life in Northern Virginia slips regularly. A very simple example is the failure of VDOT and Fairfax County to ensure maintenance of sidewalks and trails, which are being heavily used by residents during the pandemic. Not only are many asphalt trails buckled and cracked, but most gravel trails are simply mud. Low-hanging branches put walkers and biker at risk of injury. There is no attempt to get homeowners to remove dangerously low branches from trees in their yards extending over public sidewalks or for government to cut back brush and weeds, including poison ivy, that reduce the width of paths to a couple feet.

          In contrast, Raleigh, NC, which has lower taxes than Fairfax County, for example, maintains the full width of trails. We were in Raleigh in June of this year to visit our daughter.

          What does Virginia and Fairfax County spend their money on?

          • Easy –

            Gas tax in Va – 21.2 cents
            gas tax in NC – 35.4 cents

            and yes, the anti-tax boo birds do have a role in this…

          • If you look closely, you’ll find lots of examples of neglect everywhere in Fairfax….and Prince William…and Loudoun…Private sector. Public sector. Non profit. Doesn’t matter. Nobody gives a shit. Nobody cares.

    • Pitch me. I’m always looking for high-risk high-return.

  3. The 2018 GDP per capita for New Jersey is $57,084.

    For Virginia the figure is $51,736.

    The annual Federal subsidy per capita for New Jersey is minus/negative $2,638.

    The annual Federal subsidy per capita for Virginia is plus/positive $10,301.

    Virginia is not New Jersey.

    Virginia is a tick on the posterior of the Federal Government.

    • Not on the federal government’s posterior, the country’s. That postive subsidy means Virginia is taking NJ, NY, TX, CA, etc., contributions and may be denying MS from receiving its needed amount. Which beggar should receive the greater share of alms?

      • “Then, as now, Virginia’s economy functions by the exploitation of the fruit’s of others labor; then by slavery, now by taxes”.

        • Wow! Reminiscent of Grover Norqvist comparing taxes on the wealthy to the Holocaust… it was wonderful listening to Terry Gross rip him a new one for that.

          No matter how confident you may be in your comparison, sometimes lips need to be chewed.

          • Well, except that Virginia’s exploitation of the taxpayer extends to every single taxpayer, wealthy or not, who doesn’t live in Virginia.

  4. “Federal subsidy per capita?” What pray tell is that….That would include the carrier and sub contracts at Newport News, I guess. Yes, VA’s economy floats on federal spending. Everybody pulls out their hair about that, but this is the kind of year where it is a blessing.

    I can’t defend the Governor on this front. It has been a wave of tax increases, big and small, state and local, with more to come in ’21. Medicaid expansion is part of the spending growth, but not all of it.

    • It’s the difference between Federal taxes received from a state and what the FedGov spends there.

      Other states which rely more on private sector spending have to have functional, effective government lest their private sector pack up and leave for greener pastures.

      Virginia doesn’t. No matter what the imbeciles in Richmond do. the FedGov is there to pump more money into this failed state.

      That’s one big difference between New Jersey and Virginia.

      • Well, having spent 12 years working for the state’s largest federal contractor — that little nuclear boat yard on the James — I tend to think the American taxpayer is getting value for the money. I would reject the concept of “subsidy.”

        It is a fair point that moving the dry docks to another location would prove a challenge. 🙂

  5. Where in its calculation does the Cato Institute include the state’s triple AAA bond rating?

    The expansion of Medicaid was accomplished with bipartisan support, including that of the Republican Speaker of the House, who has declared he will be running for governor next year. The tax on hospitals was the proposal of the hospitals.

    Finally, conforming Virginia’s tax laws to changes in federal tax laws was hardly extraordinary. That has been the practice of the Commonwealth for many years.

    The Cato Institute seems to have ignored these little details.

    • James Wyatt Whitehead V

      I had forgotten about the coveted AAA bond rating. It seems rankings such as the Cato Institute always over measure one area and under measure or ignore in others. So given that Virginia still has some positive benefits for business is the Commonwealth really that close to the bottom in rankings? I bet it is closer to the middle of the pack.

    • It’s about what I would expect from CATA and feathered friends…

  6. The so-called “gas tax” isn’t (or wasn’t) really a tax, but a user fee for road construction and maintenance. It wasn’t raised for almost 30 years while inflation almost doubled the costs of constructing and maintaining roads. For a while Virginia’s roads were getting almost as bad as New Jersey’s. The recent increases help reduce the gap.

    Unfortunately, Gov. McDonnell’s end run to increase the sales tax and impose a tax based on the wholesale price of gas instead of an honest increase in the gas tax muddied the water.

    • The gas tax actually has a perverse effect on road funding. The higher the cost of gas (and taxes), the more people buy more efficient cars and now we’re looking at electric cars.

      Right now – today – in Virginia, the gas tax is but 1/3 of the taxes collected for transportation – and it’s actually DECLINED as the gas tax was increased.

      The other 2/3 of funding come from the sales tax on new vehicles and the general sales tax and a tax on car insuance premiums.

      you can see these numbers here:

      • It also helped (screw up the transportation budget) that hybrids were exempt from HOV regulations, which is why many of them were purchased.

      • Should be a miles traveled tax. Worst case, add up the difference in odometer readings between inspections. Best case, track the actual miles driven by GPS and assess varying taxes based on the need of the road being used. Roads that have to be expanded will be more expansion. Finally, spend the monies on the roads where the driving happened.

    • I’d agree if the monies were collected where the gas was sold at retail and then spent in the rough jurisdiction where the gas tax was collected.

      • We already do that – NoVa has a supplemental tax that belongs to them AND not well known is the fact that Smart Scale is how projects in Virginia are funded these days and jurisdictions that have the ability to leverage locally-collected money beat out the jurisdictions that don’t have that ability.

        The other thing is – if we make gasoline too expensive in Virginia – people on I-95 and I-81 will gas up in the adjacent states and not stop. If gas is cheap here, they’ll stop and then buy fast food and pay sales tax and more than 1/2% of that goes to roads. General Sales tax is 1/3 of Virginia road funding these days.

        • James Wyatt Whitehead V

          Fill up at Roy’s Gas and Go in Front Royal. Buck and 79 cents right now. 30 cents cheaper than Warrenton. Can’t imagine what gas is going for in Fairfax.

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