It’s time to put to rest the notion that Virginia is a low-tax state, or even a moderate/low tax state. On page R8 of its June 11, 2007, “Economic Round Up,” the Wall Street Journal published a chart, “Feeding the Government”, that ranked “total local, state and federal tax burdens as a percentage of each state’s income.”
Virginia ranked 18th from the top — as in, 18th highest, not lowest. Virginia’s tax burden was a hair above the national average but higher than 32 other states. Our tax burden: 32.9 percent of total income. Connecticut had the highest with 38.3 percent, Oklahoma the lowest, with 27.8 percent.
We’re accustomed to seeing Virginia rank better in state rankings. That’s because most rankings compare total state and local government spending only. But here’s the problem: The federal tax code doesn’t adjust for cost of living. When states and regions have a high cost of living (as Northern Virginia does), its nominal wage levels tend to be higher. Given the highly progressive structure of the federal tax code, nominally affluent regions wind up paying higher taxes.
Insofar as state/local government policies create dysfunctional human settlement patterns, as they do in Northern Virginia, Virginia’s political economy is directly responsible for high living costs, and indirectly responsible for high tax rates. So, let’s stop the drivel about Virginia being a “low tax” state, and get on with the business of cutting the cost of government, reforming dysfunctional human settlement patterns, and making out tax burden less onerous.
