Reworking A Bad Plan Can Make It Worse (Or, The Son Of 3202 Rises)Jul. 08, 2008
The Special Tax Session of the General Assembly resumes tomorrow and anything can happen. Some capitol insiders are predicting the session could end by the end of the day, with nothing done. That would be good. Some think the House could pass some watered down Senate tax increase, send it back to Senate Majority Leader Dick "The People Will Pay" Saslaw (D-35, Springfield) and his crowd down the hall, who will change it and take it to a conference committee, which would be dangerous enough. But others think that if anything gets out of the House, Senate Dems will pass it immediately and let Governor Tim Kaine amend it to include all the extra taxes his heart desires (we'd say that would be Christmas in July for the liberals, except many don't believe . . . oh, never mind) and send it back for an up or down vote. If that version passes, it would be a Kaine victory at the expense (literally) of the public; a taxpayer loss. If nothing happens, believe your bottom dollar (that may be all you have left right now) that the governor and the Dems will demonize conservatives as not wanting to address the transportation "crisis."
They better be careful for what they ask. It may be anecdotal, but evidence is the public, across all lines, doesn't seem to have much of an appetite for tax increases when gas is at $4.00 a gallon and all the ripple effect cost increases it is causing. Senator Saslaw during the regular session was fond of saying that his gas tax increase would cost the equivalent of one Big Mac meal per year. Actually, it was closer to a Ruth Chris dinner, but regardless, most families don't even have a Big Mac to cut back right now.
Not only that, but his proposal in the winter was a 5-cent increase over five years. Now, I guess because he wants us to cut back on apple turnovers, too, his bill would increase the gas tax by six cents over six years (SB 6009). That's a 35-percent increase. It doesn't appear as if this will pass. The House Republican leadership let it come to the floor in a procedural move in committee to force House Dems to vote on recordin anticipation of next year's House elections. The money is on many House Dems getting cold feet on this one.
However (there's always a "however"), the House GOP doesn't want to get left out of the game. They want to be sure no one can claim they have no ideas themselves, so instead of no ideas they are proposing old and bad ideas. They want to "fix" the aspect of last year's transportation package (HB 3202) that the Virginia Supreme Court ruled unconstitutional. This new package, HB 6055, patroned by Delegate Phil Hamilton (R-93, Newport News) is more complex, but is also harmful to taxpayers and the economy. Its main feature is to give local governments in Hampton Roads and Northern Virginia taxing authority in certain areas so as to spend it themselves for transportation, rather than the original, and unconstitutional, law that let unelected boards tax and spend. (To be fair, the original bill passed by the House in 2007 was to give local governments the authority; the governor amended it to give it to the unelected boards, and bipartisan majorities in the General Assembly concurred.)
While many legislators may make the political calculation that by "simply fixing" last year's plan (by voting for HB 6055) Virginians won't consider it a vote to raise taxes, they may be calculating wrong. People want the General Assembly to make hard decisions instead of asking for more money from families — again. Smart citizens know fixing a bad plan often makes it still worse.
Among the various taxes in HB 6055 is one particularly heinous tax — a $.40 per $100 increase in the "grantor's tax" in Northern Virginia. This is a tax home sellers pay at closing. As home sales continue to plummet, and some of those sales are "short" (sold for less than what is owed on it), such a tax is reckless.
Earlier this month, while detailing the state's current financial picture, Secretary of Finance Jody Wagner revealed a devastating downward trend in home sales to the House Appropriations Committee. At the time, several Republicans appropriately drilled Secretary Wagner regarding Governor Kaine's transportation proposal that included a grantor's tax. It would be peculiar for those same legislators to agree to one now, but this is the General Assembly, after all. Regardless of whether the tax is introduced by Democrats or Republicans, the governor, the Senate or the House, the effect on the housing industry is the same — it will ensure a housing recession.
HB 6055 also includes a $20 increase in the car inspection fee in Hampton Roads, an extra $100 fee on those who receive their first drivers license (in N.Va.), a hotel tax (N.Va.) and a rental car tax (in both areas), among others. Americans For Tax Reform mailed each legislator who signed its No Tax Pledge that a vote to pass the tax-increasing buck to localities is still a tax increase and violates the pledge.
Four years ago, then-Governor Mark Warner cited education, health and public safety to pass the largest tax hike in the Commonwealth's history. Apparently, in 2004, transportation was no longer the "crisis" Warner had said it was in 2002 when he tried unsuccessfully to pass regional sales tax hikes for transportation via referenda in Hampton Roads and Northern Virginia. Now, Governor Kaine and some allies in the legislature have decided to dust off the transportation "crisis" to raise taxes. This action comes only a few months after they proposed raiding the Transportation Trust Fund for non-transportation expenditures.
Some of the same lawmakers who opposed a constitutional amendment restricting the Transportation Trust Fund to transportation-only spending now support a tax hike. Even Governor Kaine, prior to his election, endorsed a "lock-box" to secure transportation funds from general fund spending and tax increases. Three years later, he has done nothing to support efforts to secure one. So what we're left with is a thinly veiled attempt to raise taxes on Virginia's families simply to raise money, not specifically for transportation.
Besides that, it appears HB 6055 is more flexible than a Russian gymnast. Specific projects are to be carried out "in consultation with members of the General Assembly" — whatever that might mean. Sadly, the level of linguistic complexity required to raise some taxes in some areas, that affect only some people in order to fix some transportation needs, all while appearing as if no taxes are being raised, makes for a legislative nightmare.
The bottom line is that for over a decade the General Assembly has bowed to the powerful education union and funded public education incorrectly, refused to reduce spending in pet projects, and counted on Virginians to pony up under the threat of disaster. If this mentality doesn't change now, in difficult economic times, what will it be like in good times? Believe me, it will be Bonnie and Clyde all over again, with a new crisis (health care or Medicare, perhaps?) and guess who they think is the bank?
The good news is that this can be stopped. Many legislators are being pressured by big-time lobbyists of big businesses who will benefit from government spending, from the teachers union which wants to ensure their portion of the pie isn't touched, and other special interest groups. But when enough concerned voters let their senators and delegates know enough is enough, it gives them the courage to resist the special interest pressures (click here to contact them). Instead of raising taxes, it is time for them to get some new ideas, such as comprehensive spending and budget reform.