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End of the line
SoVaNow.com / May 16, 2013Doctors take an oath, and it’s a useful one: First, do no harm. Last week in this space, we wrote about the stubborn refusal of the Halifax County Board of Supervisors to help the county schools even though members have money free in the budget to do so. Rather than taking care not to do harm, the supervisors passed up an easy opportunity to do good.
The Board’s collective pigheadedness is vexing. But in fairness, it should be noted that the supervisors rarely have a chance to provide additional money for services such as schools or law enforcement without first having to ask citizens to pay more in local taxes. In this case, the Board has $593,000 at its disposal, due to some fortuitous budget contingencies (higher-than-expected sales tax revenues, lower-than-expected insurance costs, this sort of thing), while the School Board’s funding request is well within supervisors’ ability to pay. Oh well. Perhaps the special nature of the circumstances has the supervisors confused.
One thing that makes the job of local elected official harder and no doubt more frustrating than it should be is the rising belief among state lawmakers that it’s just fine and peachy to shift Richmond’s fiscal responsibilities onto localities. The motive is blatantly transparent — what you have here basically is a bunch of politicians promising nice things to voters that they intend to get someone else to pay for — and the practice is growing much more ferociously than, say, the teen pregnancy rate. (Which has fallen over the past decade, in case you were wondering. If you really want to find a group that’s held accountable for performance, you’d have to reach all the way down the age ladder to fifth graders taking their SOLs.)
The abdication of fiscal responsibility in Virginia reached its pinnacle during the governorship of Jim Gilmore, a four-year, ongoing fiasco that was made possible by three simple words: No Car Tax. Gilmore’s pledge to repeal the car tax was wildly popular during the campaign, but alas, it was a fraud. Yet to the extent Gilmore’s top policy goal was partially achieved, localities have been paying the price ever since. The real lesson of the Gilmore years was stated succinctly by the author Michael Lewis, in another context (a magazine article he wrote a few years back on Wall Street): “Something for nothing: It never loses its charm.”
It’s worth revisiting the Gilmore Era because the madness is threatening to return 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 Nov. 5, 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 ol’ cheesy business magazine and learn that Virginia is pretty darned welcoming to new business — the Old Dominion 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’s so poorly designed. 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 small credit, McAuliffe has acknowledged the need to explore potential sources of new revenue through 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 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 matched his promises on the BPOL, machine and tools and merchants capital taxes and raised the ante with a pledge to further reduce income taxes by $1.4 billion. Cuccinelli has said he will replace the lost $2 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 notion 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 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 says he’s not — there’s no way you could make up the revenue he’s proposing to forfeit simply by tightening up 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 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. Board of Supervisors? Board of suckers will be a more apt title.