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SoVaNow.com / May 22, 2013If, per chance, you’re wondering when fiscal irresponsibility in Virginia reached its height, think back to the governorship of Jim Gilmore, a four-year, ongoing fiasco that was made possible by three simple words: No Car Tax. Gilmore’s pledge during the 1997 campaign to repeal the car tax was wildly popular, but alas, it also was a fraud. Yet to the extent Gilmore’s top policy goal was even partially achieved, localities have been paying the price ever since. A portion of the vehicle property tax was rolled back, but to make up for the loss of revenue the state has steadily been shifting its fiscal obligations onto local governments.
It’s worth a moment to recall the Gilmore Era because the madness is threatening to return to the Old Dominion with a vengeance. Both candidates for governor, Republican Ken Cuccinelli and Democrat Terry McAuliffe, have rolled out tax cut plans in a campaign that gets nastier by the day. Most people aren’t paying much attention to the gubernatorial race, and neither candidate is making it easy to get excited about the Nov. 5 ballot, but their tax plans do at least have the virtue of pointing up the awfulness that passes for tax policy in Richmond.
Let’s take McAuliffe’s plan first: He is proposing to abolish a basket of local levies on business: the BPOL (Business Professional Occupational Licensing) tax, the machinery and tools tax, and the merchants capital tax. The BPOL tax is the big kahuna, generating about $683 million for Virginia localities, while the machine and tools tax, levied on new equipment, raked in about $204 million last year and the merchants capital tax, on inventories, brought in $11 million.
True to form, McAuliffe is touting his tax plan as a way to make Virginia more “business friendly.” You can pick up practically any cheesy business magazine and learn that Virginia is pretty darned welcoming to new business as it is —our state ranks at or near the top of almost all of these surveys — so it’s somewhat unclear what problem McAuliffe is supposing to solve.
On the other hand, it’s certainly true that the BPOL tax, which is charged against gross receipts, is a complete annoyance for the businesses that have to pay it. Did you know the BPOL tax was first enacted to help pay for the War of 1812? No wonder it seems so creaky. The levy would appear to be the only lasting legacy of that confounded conflict, if you don’t count the National Anthem.
It probably would be a good idea, in policy terms, to get rid of the BPOL tax and allow localities to make up the lost revenue with an add-on to the sales tax, which currently is disallowed under Virginia law. The BPOL tax is obnoxious because it’s indiscriminate: The thing being taxed is the business gross, not the net, and it would be far better if instead the tax bill rose and fell with overall profitability. Of course, there’s a tax that accomplishes this — it’s called the income tax — but more about that subject in a second.
McAuliffe, because he’s running for governor, is saying, “Here’s my proposal to cut taxes. Vote for me.” To his minor credit, McAuliffe has acknowledged the need to explore potential sources of new revenue with the creation of a blue ribbon commission. Yet if commissions were cows, this one wouldn’t be winning any blue ribbons at the county livestock show. The easiest thing in the world for politicians to do is voice a pleasing thought but not complete the sentence. Something for nothing? Heck yeah!
Which brings us to Ken Cuccinelli, who is no one’s idea of pleasant. (If you want non-ending strife and ideological warfare to rein over Virginia government for the next four years, Cuccinelli’s your man.) Not to be one-upped by an alleged liberal Democrat and evil mastermind such as McAuliffe, Cuccinelli has made vague noises about getting rid of the BPOL, machine and tools and merchants capital taxes and raises the ante with a pledge to further cut income taxes by $1.4 billion. Cuccinelli has said he will replace the lost billion-plus in revenue by closing various tax loopholes and eliminating “corporate welfare.” Last year Mitt Romney made more or less these same promises, and you see where it got him.
The idea that Cuccinelli will go after tax code free-riders and corporate welfare queens to free up untold blessings for the fair citizens of Virginia is beyond laughable; this coming from an Attorney General who has barely lifted a finger to collect up to $1.7 million in back taxes and penalties assessed against Star Scientific, whose CEO, Jonnie Williams, just so happens to be a Cuccinelli friend and benefactor. Do you really expect Cuccinelli to wage jihad on his corporate welfare and risk losing visitation privileges at Williams’ pad on Smith Mountain Lake? Even if Cuccinelli were as much a straight arrow as he purports to be — and the evidence overwhelmingly indicates he’s not — there’s no way you could make up the revenue he’s proposing to give away simply by tightening the tax code. The Republican nominee might as well promise a Ferrari in every garage and dinosaur rides for all the kids.
There is one potential way out of this who-pays box for Cuccinelli (and to a lesser extent, McAuliffe): Dump the burden of these crazy tax cut schemes onto localities. If you enjoy receiving county property bills in the mail, you should be positively jacked about a future in which Ken Cuccinelli moonlights as Virginia governor during those moments when he isn’t guest starring on Fox News. Because you can rest assured that these big-talk promises, especially by Cuccinelli but quite possibly from McAuliffe, too, have nowhere to go but down: down to the local level, where the buck-passing chain comes to an end.
If you think the job of supervisor or town council member is thankless now, stick around as local governments confront the inevitable choice of eviscerating services or asking homeowners to pay more to make up for lost state funding. Board of Supervisors? Board of suckers would be a more apt title.
With Republicans’ selection this weekend of the most ideologically extreme ticket in modern Virginia political history, this may be the last time anyone talks about the fiscal impact of the candidates’ proposals. I generally prefer to vote on the basis of what politicians say about bread-and-butter economic issues, but with this cast of GOP characters — Cuccinelli for governor, E.W. Jackson for lieutenant governor (Actual quote: “Planned Parenthood has been far more lethal to black lives than the KKK ever was”), and Mark Obenshain for attorney general (fact: he introduced a bill in the legislature requiring women to report miscarriages to police within 24 hours or face misdemeanor charges) — everything between now and November will be about THE CRAZY.
Put it this way: arguably the most establishment candidate on the ticket (Obenshain) deemed it advantageous during the run-up to his nomination to tout his support for allowing guns in bars. This from the squish wing of the Republican hard-right. Houston, we have a problem.