“It’s a feeding frenzy, with every legislator sticking on their pet tax before the bill leaves the legislature,” says Jim Parmalee of Republicans United for Tax Relief. “Legislators who opposed the tax hikes weren’t allowed on the conference committee that is designing the final bill.”
So far Governor McDonnell has given no sign that he is willing to veto the bill, despite its kudzu-like growth beyond his original plan. Attorney General Ken Cuccinelli, the almost-certain GOP nominee for governor to succeed McDonnell, has finally come out in firm opposition. He says, “In these tough economic times, I do not believe Virginia’s middle class can afford massive tax increases, and I cannot support legislation that would ask the taxpayers to shoulder an even heavier burden.”
Grover Norquist, the president of Americans for Tax Reform, says the Virginia tax binge is even more disappointing in light of what other states are doing. “North Carolina, Louisiana, Kansas, and Nebraska are trying to eliminate their state income taxes,” he notes. “Ohio, Oklahoma, Indiana, and Wisconsin are cutting their income taxes. Florida and Texas are cutting their sales taxes because they have no income tax. All of these states have roads, and elected officials that stand with taxpayers rather than against them.”
Indeed, there are many creative ways that Virginia could restructure its budget to ensure there is enough money for transportation. The state has run a $1.2 billion surplus over the last three years, but the surplus was not returned to taxpayers; it went into a rainy-day fund. The legislature saw fit to spend less than 7 percent of that rainy-day fund on transportation. Gabriel Roth, who worked on transportation economics for 20 years at the World Bank, told National Journal that the governor’s plan “places highway financing in the hands of Virginia’s politicians, whose recent experience in financing transport infrastructure has been unfortunate.” If you can’t prioritize roads when you have unexpected revenue surpluses because the economy grew faster than you were planning, when can you prioritize roads? Previous tax increases in Virginia were sold on the premise that they would be dedicated to either roads or education, but lawmakers did not follow through on those promises.
What Virginia needs is a sweeping tax reform, one that recognizes that the state has a 21st-century economy burdened by an archaic corporate- and personal-tax system that badly needs streamlining. As part of that, the state could create a dedicated road fund that would be paid for by the people who use the roads. Adding tax increases to the existing system will only slow down the economy and reduce the chance that the money will go where it’s most needed.
The danger now is that Democrats in the state legislature have been so emboldened by the expansion of the tax increase in the budget that some of them are now demanding that Governor McDonnell agree to the Medicaid expansion as the price for ensuring the Democratic votes necessary to pass the budget. Whatever McDonnell does, he shouldn’t compound the tax fiasco he is overseeing with a cave-in on Medicaid that would eventually leave the state budget in worse shape than he found it in four years ago.
— John Fund is a national-affairs columnist for NRO.