Tax Increases On The Horizon?
Virginia Governor Tim Kaine is preparing the budget proposal for this coming year, and so far, the indications point towards a bringing back the car tax and placing other tax increase ideas “on the table,” as a way to balance the budget. This could not come at a worst time, as we are in an economic recession and unemployment numbers are at the highest they have been in a long time (these numbers continue to climb). It’s hard enough for many Virginia families to afford another tax increase, especially in a dismal economy.
Perhaps, we should take a look at why Kaine is placing tax increases on the table. Could it be that his administration was overly optimistic in budget projections over the past few years?
There are other alternatives to raising taxes. Recently, Lieutenant Governor Bill Bolling, along with House Speaker Bill Howell, Lacey Putney, Chairman of the House Appropriations Committee, Senate Minority Leader Tommy Norment, and William C. Wampler, Ranking Republican on the Senate Finance Committee sent a letter to the Governor requesting that he look at other alternatives, such as cutting spending and eliminating unessential programs. This is the only viable and fiscally responsible way to address balancing a budget without placing strain on taxpayers.
Hopefully, Kaine will listen to the suggestions from Bolling and the other Republican leaders and work towards common sense solutions to balancing the Commonwealth’s budget.
Category: Government
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Yes, this is usually the time that we receive the calls for cutting non essential spending, cutting the fat, and getting rid of low priority programs. Of course to many of those saying that, there is a disconnect between actually cutting schools, public safety, and courts and justice. This is when we see the difference between running for office, and once elected, actually governing. Promises have been made, especially about being a jobs Governor, so immediately cutting jobs would appear to be off message. If only there were a line item for fat!
Re the car tax: please recall that when Gilmore first proposed the elimination of the car tax, part of the deal was to reimburse localities for the lost revenue. For example, since the City of ABC stood to lose tens of millions of dollars a year when the car tax was eliminated, the state promised to stroke a check to the City of ABC, and to every other locality, to cover the losses. The Governor proposed it, the General Assembly approved it, and it was written into law. Yet oddly, most voters/taxpayers are clueless about that caveat.
Now, the state has been making these payments to localities for what, 12 years? That’s a ton of coin. Not to mention they are using OUR income and sales taxes to do it. It was a total shell game from the get go.
Kaine is not talking about “bringing back the car tax.” If anything, he will propose that the state stop re-imbursing the localities, or at least reduce the percentage. Then it would be up to the localities to re-implement the tax or not. Again, Richmond takes the easy way out and the localities will end up looking like the bad guys.
Richmond should never have been meddling with a locality revenue source to begin with, period. And Gilmore and Co. were warned repeatedly that this was not a sustainable plan. But it was a good sound bite, and fit nicely onto a campaign yard sign.
And it’s amazing to me the average voter/taxpayer just doesn’t bother with the real details of the “No Car Tax” fiasco. Jim Gilmore should hang his head in shame for what he did to our Commonwealth. And so should anyone who voted for his shameless, deceptive scam. Bunch of tools.
What Gilmore should have done was abolish the car tax entirely. No reimbursement from the state (saving $950 million now) and the localities would learn to live leaner than they are now (well not this moment with a recession), but for the most part. Gilmore would have shown very conservative principles, by abolishing a tax, thus forcing local governments to curtail their spending and reach into its citizen’s wallets. I shouldn’t have to pay a tax on a car that I already bought and paid a sales tax no. An automobile is not a luxury in today’s society, since we have to commute to work and public transportation is a joke.
Well, of course J.M., he should have abolished the personal property tax, and while he was at it, why not the income tax, the sales tax, and the real estate tax. Had he proposed such, he could be elected in the eastern part of Virginia Beach where all the women are beautiful, all the men are strong and free, and all the children are above average. But reality intervenes, and we need to pay taxes to support the common good, into which we lump such services as public safety, courts and justice, human services, and K-12 education. But I guess those aren’t necessary either.
J.M., the sales tax you pay on your car goes to the state. The personal property tax you pay on your car goes to the locality in which you live. The justification for such a tax is that the locality has to pay for streets and bridges, parking lots, traffic lights, traffic cops, traffic court, etc. All so you can even drive your car in the locality.
Obviously you two are liberal Democrats. I believe in conservative principles and common sense tax policy. The less tax the government takes from its citizens the better. It gives them more to spend and provide for their families and it controls the growth and reach of government. Yes, I know taxes are a necessary evil. However, other localities (not in Virginia), don’t have a tax every year on cars and have enough money to pay for the above mentioned services.
Oh yeah, Mike, sarcasm is the tool of a feeble mind!
Oh, yeah, Mike, sarcasm is a tool of a feeble mind!
J.M.-the car “tax cut” (actually no taxes were cut, what changed was how they were getting paid) never made sense from a conservative point of view. At the state level, it’s a spending program. It takes sales and income tax and uses them to pay local personal property tax bills. The car tax was not eliminated or even reduced. It’s basically the state taking money out of your left pocket and putting it back in your right pocket. Especially since the car tax reimbursement program drove the shortfall that lead to the Warner tax increase. Any number of Republican members of the General Assembly knew this was a bad idea and knew how much it was really going to cost. Everybody knew, apparently, except the Gilmore campaign. My guess is they knew too and just lied about it. Getting rid of the reimbursement program would be an act of fiscal sanity on the state’s part. It isn’t going to happen though.
Yes J.M., I am pleased that those with sufficiently conservative credentials have educated you herein about the reality of the car tax debacle. Of course, as a political strategy, it was a miracle, and as a part of the play book, it retains its attractiveness despite its actual effect.
That said, my “sarcasm” was simply to point out that this is not the time for euphemism; that is, calls to curtail the growth of government, or to cut the fat, or to cut lower priority programs, or to restore fiscal sanity. It is the time for cold hard analysis of what is important and what is not. As a business person, transportation, education, public safety, and a functioning system of human services is crucial, yet it appears that the effect of lower tax revenue is going to curtail these essential government services that support and stimulate business growth and opportunity.
To me, these cuts do not produce economic development nor prosperity; they can be counter productive and hurtful to economic growth. The time for hyperbole is over; the time for responsible governance is now.
There are many arguments for and against the car tax. We could argue til the cows came home whether it is necessary or just fat.
However, a gubernatorial candidate cannot and should not be calling the shots for how the cities and counties run their budgets. The Commonwealth just cannot eliminate for example, $45 million from the County of Chesterfield, or $30 million the City of Norfolk, or $5 million from Wise County, and expect them to just suck it up. That would be like John Kerry or Sarah Palin (or any presidential candidate) running on the platform of slashing Virginia’s state budget or Texas’s state budget.
Whether a local tax is fair or justified is not the issue. Gilmore was wrong to propose the elimination of a revenue source for localities because he had no authority to do so. Moreover, the spineless members of the GA who voted for it, and the short-sighted citizenry who fell for it, are equally to blame here.
Jimmy,
The last time I checked Virginia was a “Dillion Rule” state, therefore, the state government can do or say whatever they want to localities, which must comply. Hunter v. Pittsburgh.
What you see above is a fine illustration of typical arguements between the Public Transportation/urban builders crowd and those that prefer that the individual be free to own their own means of transportation (our cars).
Those that prefer to drive and live a suburban lifestyle don’t necessarily have to see urbanization as the enemy. You actually can have two types of communities living side by side. Unfortunately, much of the Pro-Public Transportation/density development crowd, see suburbanites and their freedom as the enemy. Urban arguers, embrace socialism and the public sector blindly, while ignoring the needs of their foundation. They specifically want a car tax and to make it less affordable to drive. They want car taxes, gas taxes, and to publicly finance density projects all at once before the density arrives because they just gotta have it NOW no matter the pain to everybody else. While Virginia Beach is losing population due to THEIR fiscal policies, they are trying to build density projects. “Build it and they will come”, just doesn’t work in an area that people are deserting. VB management and council are sucking the life blood out of what would be the foundation for their mega-projects.
The car tax and gas taxes are just revenue streams! JimmyD even points out, you CAN have other revenue streams(the shell game arguement). Specific taxation on private transportation hurts the individual. Urban builders seem to think this is a good idea……punish the individual and force them economically to comply and be assimilated. As an added bonus, without your car payment, you can afford higher housing costs and more taxes!!! Yay!! Never mind the fact that taxpayers and their tax base will just leave when you make it too expensive for them to stay. Then your suburban housing market suffers demand side and your property revenues that you fought so hard to increase, start dropping. Sales taxes and fees dwindle as the population declines. Eventually, labor for businesses will become an issue. Even without a stressed economy, this is a bad model. You also engender political hostility from people accustomed to suburban lives. Nobody appreciates something being forced down their throats. We are Americans, after all.
*Note: I’m not calling for zero gas taxes. I’m just pointing to the willingness of some to go beyond a balanced user tax. They want to overtax that behavior to crush it and wonder why there’s no money after they succeed. Later, they will bemoan the loss of revenue and raise taxes elsewhere……….another “shell game”. One created after killing their own revenue stream.
The wreckless overspending is another huge mistake. You’re killing the golden goose here. We don’t like tax & spend/borrow & spend made even worse by wasted tax dollars.
You need a healthy suburbia around your urban center! Its time the “urban planners” take their blinders off to that.
If you “build it” (an urban center), you have a product to sell and you make it possible to sell it. Maybe they “will come”. Do what you have to, to sell or create demand. Forcing demand isn’t as efficient as you think. Stop punishing suburbia. Some will never want urban living, the others won’t either unless you find ways to positively stimulate demand for it. What about hard core suburban sprawlers that will never live “your lifestyle”, but occasionaly spend money in your urban center? Too bad you’re driving them out. There goes a percentage of revenue supporting urban business! What about the next generation that you are forcing out of the area by pricing their parents out of the market? How many customers are you preventing from even seeing your product? Something different and more exciting than Mom & Dad’s boring block of busybody neighbors? Future young professionals are attracted to a well planned urban product. Outsiders that want urban living but, cheaper & cleaner than their current area, might be interested, but NOT if you wreck the local economy and your house of cards starts to crumble. Not if your foundation has scattered to the winds along with the next generation of local urban dwellers.
If Kaine, stops or reduces reimbursements of the car tax relief, look at it as a revenue stream cut. That “shell game” that Jimmy refers to, applies. Reality is, you stand to take cuts somewhere. Just Kaine’s “shell game” this time. We face cuts, spending extra won’t work. If Kaine makes more cuts,Republicans should give him credit. Democrats and cities like VB, should be more focused on making wise temporary reductions and looking for ways to grow the private sector. Spending money to attract targeted balance sheet proven revenue streams, does not mean throwing tax dollars around with near abandon. See our national debt on that point.
Thanks Britt for proving my point. You counsel “wise temporary reductions” which is a euphemism for what? Do we reduce the police force? Cut teachers? Close recreation centers? Lay off mental health workers just after the commission studying the Virgina Tech massacre recommneded overhauling the mental health system?
Now frankly, some of these measures may be necessary, but most anti tax proponents fail to acknowledge that there are many supporters for a reasonable level of service. In fact, if McDonnell restores all of Kaine’s expected increases, and McDonnell must then cut the share of state money to localities, there will be major layoffs of service providers. If that happens, at the May public hearings on the city budget, there will be thousands of disgruntled employees and citizens who will blame the city council, who will take great pains to tell all that the Commonwealth is to blame.
That of course is one reason Gilmore led his party into the wilderness for awhile. If the scenario plays out as I have predicted, that may happen again. Perhaps a moderate course of some increased taxes and fees with some cuts in services is the best course of action. MJB sends!
Steve, I forgot to mention:
You’re right that reimbursment just meant that the state took money from the cities and gave it right back to them. That did mean that funding had to come from what was then a huge surplus and later from state revenue streams(taxes). It was a shell game. Just like the shell game that Democrats often use to tell the taxpayer the taxes are needed to pay for something when something in the books was already shifted to pay for it anyway, and you end up raising NEW taxes. Just like the general fund can’t be used for transportation because the general fund is really the education fund. At least according to rhetoric from the Left.
So, you’re right about taking money from your left pocket and putting it in the right. What you are dead wrong about is the car tax reimbursement causing the negative balance sheet that resulted in Warner’s lie about raising taxes.
The other states did NOT have car tax relief programs, yet like now, the state economies were in turmoil due to a NATIONWIDE recession that was beyond the control of any governor. Worldwide economic problems brought on by terrorists and uncertainty of war was Somehow Gilmore’s fault? Gilmore was what caused your 401k to nose dive?
That’s like blaming Kaine for the horrible economy he’s dealt with. Do we blame Kaine for Bush spending us into oblivion? The credit crunch? The real estate bubble? Did Kaine’s policies plunge my 401k into the toilet before it regained strength recently? That wouldn’t be fair either.
For the record, and its archived in newspapers online, Warner’s taxes did NOT go into effect until *after* there was already a return to budget surpluses. That tax increase was totally unnecessary. The state revenues were already trending to more than balance as early as April/May preceding the enactment of those taxes.
You have an arguement about the wisdom of the car tax relief program. Your assertions relating to Gilmore’s affect on the economy is just flat wrong.
Mike, if you don’t have the money, you don’t have the money. At least this time when council blames it on the state reductions, there will be some arguement. Thing is, they’ll try to also cover their own overspending with this convenient fact.
Fact is, due to dwindling population, they are actually closing elementary schools for over capacity. Some cuts could surely be made there. How about delaying all the special development projects. The city wants to build along Laskin, Towne Center etc. etc. I’m not saying kill off everything, just fund what is necessary or brings immediate return on investment. Why is council even considering new projects? Unreal. THAT competes with revenue for jobs in teaching,police etc. Spore has asked for budget cuts from all departments with smaller cuts for public safety. Still, he wants new projects? Tell that to the city workers!
To answer your question, cut what and where most prudent. You want as little damage as possible. And stop the extra spending for now. Long term thinking is fine when you’re not facing immediate negative balance sheets.
There were cutting of temporary hires and four hour work week reductions for some permanent staff at my job. Nobody was happy about that but, it had to be done. BTW, that’s all been reversed now. Apparently it helps.
Public sector isn’t immune to bad economies. Fixing the balance sheet should be job #1. That’s what prevents long term layoffs, that fiscal sanity some of you deride.
Let’s take a lesson from Michigan and California: big, wasteful government always wants more and always delivers less.
I hope our new, larger majority in the House of Delegates will hold the line on any new taxes.
Britt, since just about every developer I know is a republican, and a conservative one at that, I am surprised at your disdain of investments by the private sector that produce jobs, income, and taxes. Fact is, the projects you criticize actually produce tax benefits that increase the commercial tax base and therefore keep our residential tax low. The financing of these projects produces an immediate increase in tax revenue and most cover their own debt service and increase the commercial tax base significantly. Now, most democrats don’t understand nor accept that fact, but most republican businessmen absolutely do. So what are you?
Mike, that’s all fine until you overextend your debt.
Generally Brian, the rating agencies do not put the coveted triple A bond rating on a city’s debt that they consider to be over extended. So I think I will accept their view instead of yours.
Britt,
It wasn’t an arguement about Gilmore’s effect on the economy, it was an arguement about his effect on the budget. Look at the hole the General Assembly was trying to fill that year. Look at the size of the car tax reimbursement program. Hmmmm, they look pretty similar. Absent the car tax relief program there would have been no hole in the budget that year.
“So I think I will accept their view instead of yours.”
Mike, I have the same feeling whenever you endorse a candidate.
After all we have seen the past two years, why would any investor believe the rating agencies? Derivatives were A Number One to them. Mortgage securities were a terrific safe place for our retirement accounts. And Lehman was top of the class, too big to fail. Yet now we are supposed to believe government debt is rated any better than that other junk. Bah! Muni bonds are standing up on the cliff, waiting to follow Commercial Real Estate’s free fall. But the real bail out will be all the young people headed out of here because they can’t afford the thousands of dollars coming out of their crap wages to pay for the politicians financial follies.
Mike, the city does not immediatly realize return on investment. Often it is bonded and takes years. In some cases you need TIFs.
Now when you say *private investment*, that’s certainly different. That, not being tacpayer money, is absolutely is welcome. I’m not sure where you got that as my view.
If a little seed money brings a new company here and brings large numbers of high paying jobs and taxes with it, I’m all for using public tax dollars for that purpose even now. Otherwise keep the grubby hands off our tax dollars till you balance the books.
As for your discussion of fiscal health with Brian and myself….. How about what Mayor Sessom’s says? What about what Whitesell?
The Virginian-Pilot
© November 18, 2009
(Headline) Beach expects $84M shortfall
“It is a lot of money,” Mayor Will Sessoms said of the shortfall.
“We have long-term structural imbalances in our budget,” said Catheryn Whitesell, the city’s budget director, as she presented the City Council and School Board with the five-year financial forecast on Tuesday.
Kinda indicative of a problem there, Mike. Maybe they should cut some spending and not blow city worker paychecks building new stuff. Virginia Beach will still be here next year. You can always do the extras when you can afford it.
Hey, investing in the stock market, especially in a 401k is a smart idea. Now, if you’re going broke, its better to cut back your contribution and keep food in your children’s bellies. Same logic.
Steve, budget……state economy…….you don’t see where I draw that conclusion from? Look, when I saw the stock market drop like a rock, I knew capital gains were going be non-existent. When people stopped spending, that meant no sales taxes. Absent 9-11 and resulting world wide economic turmoil, that “budget hole” you spoke of, probably wouldn’t have been there. Car tax relief or no car tax relief. Let’s be real about what actually happend.
Very odd that you would criticize PPVs when the city has just made its updated report on TIF’s. I won’t bore you with the lengthly report, just a few conclusions. TIF’s have exceeded their projections, they cover their own debt for public infrastructure, the effective growth of property values in TIF districts have exceeded by double the rate of the city overall, and they return millions of dollars to the general fund from the collection of other business taxes. So they don’t cost the general taxpayer a dime, they increase the commercial tax base, and they return millions per year to the general fund to keep our taxes low. So again, Britt, as a conservative republican interested in running the municipal corporation effectively, do you recommend that we stop future investment in additonal PPV’s that would do the same thing?
Mike, first off, in general terms I am not “against” TIFs. Value capturing financing, although open to abuse and lazy planning/application, can be a useful tool. I am not necessarily against Private/Public Partnerships. Although also open to abuse, it too can be a good thing if done properly. I’m am not an enemy of Towne Center. We have it, its there, I hope it works. I guess you missed my mentioning that urban centers don’t have to be enemies of suburbia. You only see my notes of caution and take that as full scale opposition.
Secondly, you make political references to yourself and to me. I have not been a Republican for years. I call myself a conservative and at the moment, am a member of the Tidewater Libertarian Party. I’m not therefore limited by a party oath to support someone that my heart does not. I do generally support Republicans. Like many that read this blog, I too have given money, time, and votes to Republicans. Eventhough I’m a horrible third party guy, I have been sent invitations to go to the Inauguration in Richmond for McDonnell, Bolling, and Cuccinelli. Kinda like most that visit this blog I suspect. You may indeed be a member of the Republican Party, I don’t know. So, is Sessoms and Paul Lanteigne, but we all know about their endorsements of Democrats. We see the Tax and spend policies of Sessoms. Long time readers here know I have never pretended to be the perfect Republican. I certainly hope you intend to offer an accurate representation of yourself as well. Mike, we’ve had many discussions on VNS. Your party affiliation was never a topic there and your mention of
“Now, most democrats don’t understand nor accept that fact, but most republican businessmen absolutely do. So what are you?”
…..was a bit uncharacteristic of you.
Don’t get me wrong. I did anticipate some political change from you. Now that the Obama administration has put out horrible socialistic ideas like Universal Health Care and Cap & Trade, the Chambers of Commerce are no longer on the VIP guest list, I hear.
However, instead of labeling Britt and Mike, let’s stick to the points of arguement?
I have not read the TIF Report you mention. I have not read Beth Allen’s contentions.
What are my specific concerns?
1. I do strongly suspect that the ease of a TIF lends itself to projects like the bridge to Pembroke Mall. Are you going to tell me that property values will be so increased by that simply existing that the rest of the TIF wouldn’t be subsidizing that bridge? That then does cost the taxpayers in lost opportunity. Thank goodness that bridge…..went nowhere. (pun intended)
2. I don’t own a home or business near Town Center so, if the district is too widely cast, I’m not “up on that”. Somebody living nearby, may feel differently.
3. Sometimes “Value capturing” financing devices capture value that would have been there anyway through inflation or development that already provided profitable incentives to developers WITHOUT city contributions. Incentives are one thing, political paybacks and over subsidizing is another.
4. When I read stories about requests for a change in the city’s contribution…….that concerns me.
5. Ok, you built it and you’re paying for it. The businesses have to survive or the landlords don’t get their rent and the city stands to lose business taxes. Especially hurtful if the buildings can’t afford to pay property taxes. There is the issue of a possible looming commercial real estate market crash. Exposure to this kind of debt can be risky in our current economy. We’ve seen articles about restaurants bemoaning the high rent and that they might be tempted to pursue cheaper options.
6. There was talk of shell games earlier in this thread. If a commercial property market collapse happens, you don’t want to imagine the “creative accounting” that will pop up. In that case, the taxpayers and the city workers will “eat it” big time.
Is my message anti-development? Anti-Towne Center? Anti-TIF? Anti-Public/Private? No. I see a place for that kind of stuff as well as your more traditional entrepreneurship. I am a Free Market kind of guy. That means I want those option available, but not to the point where it damages unfairly other competitors or the balance of the local economy.
Really, I do love Virginia Beach. Yes, Mike. I do want things to be run efficiently. I get the theory about value capturing and increasing the tax base. My point is, if you don’t have strong financial reserve, and you have the budget shortfalls that we do:
1)Plowing ahead with additional projects over exposes us to this type of risk in the event of a commercial property collapse. We won’t have sufficient reserves. Focus more on what we have and its health.
2)Management and council have enough to worry about at this time without new projects.
3)Yes, I do suggest a temporary suspension and review of new projects where we are not already legally obligated to move forward on. We can always move forward on them later. Maybe even review them for improvements.
Britt, way too much information. You counseled “wise temporary reductions’ yet if others had done that before, our tax rate would be much higher today. My point is that candidates get to use these euphemisms, but elected officials need to deal with reality. If you were in the position, and you cut support for these PPV’s that have gererated such positive fiscal returns, you would be making a mistake. It really is that simple. MJB sends!
Now we have huge budgetary shortfalls in revenue. THAT is the reality that current elected officials need to deal with. That is what is simple and true.
“Wise temporary reductions” is meant for this point in time, not pre-Town Center. Putting new items on hold now, is not the same as then. Our budgetary condition is much different now, Mike. Exposure to commercial assets that finance bonding is much greater now than then. Those “Wise temporary reductions” were meant for not just suspending and reviewing NEW projects, but if necessary, across the board. New spending should be off limits with rare exceptions. (incentives that bring in new high paying jobs)
Spore has indeed asked all the departments for cuts, I agree with that. If you don’t have the money, you don’t have the money. What I don’t agree with, and what city workers probably don’t agree with, is Spore, Sessoms, and company are STILL looking for new ways to SPEND money and exposing us to more financing while everyone else has to make cuts. On top of cuts, Sessoms wants tax increases which city workers that live in VB, if they can afford to, ALSO have to pay! Sessoms also reccomended new spending projects to be paid for by those taxes. Taxes that represent an increase to the cost of living.
Britt, no need to respond to this. Perhaps you recall that way up near the top of this forum, I agreed that cuts need to be made and increases in revenue considered. The point is, you implied that PPVs should be suspended, even though they produce tax revenue that would not be there is the project had not proceeded, which would have made our current situation worse, not better. Point is, with the Commonwealth set to cut thousands of jobs, and to require localities to do the same, we must act to find better ways to help our citizens prosper. MJB sends!
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