There you go again. Jim Gilmore almost irreparably damaged Virginia finances with tax cuts justified by bubble income that surely could not be sustained. Anti-taxers are now singing the same refrain in light of increased income reported yesterday by Secretary of Finance John Bennett.
It’s surprising that anti-taxers would even say this, knowing that 17 months remain before the election for the House of Delegates and Governor. That’s plenty of time for a few bad months to prove those who say we’ll grow out of our budget problems wrong again. It’s also plenty of time for Democrats to build the case that not raising taxes would have been disastrous.
Gov. Mark Warner (D) is already honing that argument.
…Warner said the anti-tax “naysayers” are not in touch with the state’s budget realities. Pointing to the surge in tax collections, Warner warned against expectations that such increases will continue forever, saying that an upswing in the stock market helped boost revenues.
“To take one or two months [of good revenue reports] and say, ‘Hallelujah, we’re out of the woods!’- that’s the kind of thinking that got us into this situation in the first place,” the governor said. “I wouldn’t bet the future of Virginia” on such high levels of economic growth.
During the administrations of Warner’s two GOP predecessors, the state granted more than $1 billion in tax exemptions as well as car-tax relief. Along with a recession and repercussions from the Sept. 11 attacks, the state cut taxes and initiated new spending programs.
When the dot-com bubble burst, Virginia’s once-booming tax collections plummeted. Warner has said he was forced to break his no-tax-increase pledge because of emergency needs in state services despite his record cuts in agency budgets to deal with a $6 billion shortfall. The state’s annual revenue growth during the past 30 years has averaged about 5 percent, he said.
Rather than run from or minimize the importance of the tax increase, Democrats should tout it as responsible government. My fear is some Democrats will run from it and instead spend their ’05 campaigns promising not to raise taxes again. Some are already publicly regretting their votes this year.
There’s a thoughtful editorial in the Hampton Roads Daily Press about how localities will allocate the extra funds the new budget delivers to them. The editorial makes the argument that property tax relief may be a legitimate use of the found money.
Maybe. But the refrain that property taxes are too high is so often repeated that it’s become a given fact, when a more rigorous examination is needed before we make that broad claim. Few people in my neck of the woods – Fairfax – complained about property taxes during the 90s when the housing market remained flat as did property taxes for the most part. It may be that our property taxes aren’t too high at all. What’s riled folks is the rate of increase over the past few years. The increase is more catch-up after stagnant 90s than anything else.
In fact, a study issued last year by the Institute on Tax and Economic Policy found that as a percent of income only the bottom 20 percent of Virginians are actually paying a greater percentage of their incomes on property taxes over a 13-year period beginning in 1989. That, more than anything, proves the inequity of Virginia’s tax system. The top 1 percent, for example, were paying 0.2 percent less of their income on property taxes in 2002 than they were in 1989.
It’s difficult to compare property rates state-to-state because states property tax structures vary. Some localities have separate school and trash taxes, for example.
But before we assume property taxes are too high, more data is necessary.