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On the march

SoVaNow.com / January 31, 2019
Teachers around the state headed to Richmond on Monday to rally for better pay. As well they should! While you wouldn’t know it looking around these parts, Virginia is one of the most prosperous states in the U.S. (thanks Northern Virginia.) We have no problem ponying up a billion-plus dollars to lure Amazon to the Arlington area — with a package that consists of solid public investments in education and transit (good) and direct subsidies to Amazon (bad). Yet when it comes to compensating teachers fairly, Virginia lags well behind the pack.

Since 2000, real earnings of Virginia teachers (salaries adjusted for inflation) have fallen by more than eight percent, placing the Commonwealth near the bottom of the heap with states like Colorado, Arizona and West Virginia. (Inflation-adjusted teacher salaries in Indiana have dropped by nearly 16 percent since 2000, making the Hoosier State the worst of the worst. All comparisons are courtesy of the National Center for Education Statistics, on the web at nces.ed.gov).

Not by coincidence, many of the states with the most woeful records on school employee compensation have been hit with teacher strikes, which in turn have garnered widespread public support — hardly a given, considering these labor actions generally lead to school shutdowns. (Note the contrast with what has been happening in Washington lately.) As a relatively wealthy state, Virginia has no excuse for not closing its school spending gap. This goes for state funding for local school facilities, too, but that’s a story for a different column.

On the same day educators rallied in Richmond, the Republican leadership of the House of Delegates announced their upcoming budget plan would include a 5 percent teacher pay increase. Good for the House GOP — Democratic Gov. Ralph Northam also has a 5 percent salary hike in his budget, so the chances look good for real progress on this front. (The Senate Finance Committee, which includes our local senator Frank Ruff as a member, has yet to reveal its intentions.) A key difference between the proposals by the governor and the House GOP is the House purportedly has found a way to fully fund the 5 percent pay raise. By contrast, Northam’s plan requires local governments to pony up half the required money, about $88 million. We’ll see in the days to come whose numbers hold up better.

Most years in Richmond, there’s a mystifying dance around the budget, generally working like this: the governor of one party will propose various goodies in his package, leaders of the opposition in the General Assembly will decry the waste and abuse allegedly rife on every page, then lawmakers will come out with their own wondrous plans that provide even more goodies than the governor ever considered to offer, at no additional cost to taxpayers, natch. There’s always plenty of hocus-pocus and voodoo going on (and it’s not unusual for the most expensive items to be cancelled later when tax revenues fall short), but it is what it is. Caveat emptor, what will be will be — pick your own catchphrase to explain how it all works.

Just one observation: even with as 5 percent teacher pay increase, assuming it comes to pass, Virginia still has huge ground to make up to achieve parity with the rest of the U.S. (Teacher pay in Virginia ranks 34th in the country, according to the Virginia Education Association. By income, Virginia ranks 12th.) Switching gears for a second, the Amazon deal plainly illustrates where the state’s wealth lies — in urban and suburban areas like Northern Virginia where upper income earners generally choose to reside. Given this fact, it’s not unreasonable to suggest that it’s here that everyone should look for tax revenue to beef up state spending on education. You might think such a modest proposal would be a no-brainer in Southside Virginia, since we have a proportionately high number of teachers in the workforce and a proportionally low number of well-heeled taxpayers. Instead, what you’ll find if you peel the onion enough is we continue to be our own worst enemy. What do I mean by this? Indulge me a few more paragraphs and I’ll try to explain.

Elsewhere you’ll find Frank Ruff’s constituent report. (You remember Frank. Wins re-election in a breeze every time.) By the standards of the genre, his latest column is a relative standout — heck, even I appreciate Ruff’s introduction (“In the news, you may have heard the term ‘tax conformity’. More than likely, your eyes have glazed over.” Hard to argue the senator’s point there.) Beneath the complexity of the issue, however, there’s something important to realize: the tax conformity debate, while insanely dull, has big stakes: there’s roughly a billion dollars involved in this policy debate, which revolves around whether Virginia should continue to follow the lead of the federal government with the handling of the state tax code.

As mentioned, this is boring, boring stuff — Elon Musk, eat your heart out. But there’s something else to know: this fight in Richmond, between Democratic Gov. Ralph Northam on one side and Assembly Republicans on the other, has nothing to do with the taxes that average people in Southside Virginia pay to state coffers. Instead, the tax conformity debate is largely about protecting upper income earners from the unintended consequences of the Tax Cuts and Jobs Act of 2017 — a.k.a. the Trump tax cut, a law that was poorly crafted in too many ways to list in this space. Suffice it to say, Ruff’s game here, as usual, is to blow smoke at constituents who don’t have time to wander through the fog of specifics.

The gist of Ruff’s column is to jab at Gov. Ralph Northam for proposing to conform the state tax code with the federal law, which would adversely affect a sliver of Virginia taxpayers — roughly 1 in 8, all residing at the upper end of the income ladder. In pure policy terms, no accountant in his or her right mind would endorse the Republican opposition to conformity — adopting the GOP approach would throw state and federal tax codes out of alignment, creating enormous hassle and administrative expense. No, this is an issue that’s all about who pays, pure and simple.

In column, Ruff faults the governor for laying claim to “windfall taxes,” but he also writes this: “No longer can families deduct huge mortgage interest payments and other items.” What group do you think has huge mortgage interest to report on their tax returns? Not the overwhelming majority of Southside citizens, certainly: most folks hereabouts (hand goes up) simply claim the standard deduction and move on from there. If, however, you do pay whopping interest on the loan on your whopping home, then you probably will want to itemize this expense on your return. This has become a problem only because Virginia has a middling standard deduction, whereas the 2017 tax law doubled the standard deduction on your federal return.

Hence, some people with lots of deductions (because they have lots of income to offset) will have to make a fateful choice: itemize or not, since tax conformity demands consistency (you can’t take the standard deduction on your federal return and then turn around and itemize on your state return). For various reasons, this hits people who are prone to purchasing expensive homes .... like, say, 25,000 Amazon employees who are joining the homebuying market in Northern Virginia. Here in Southside Virginia? Not so much.

Like I said, there are complexities throughout this debate, and perhaps Ruff will choose to expound on some of them in future installments of his column. Yet the underlying reality is actually pretty simple: state government fails to invest in all kinds of things that would be hugely beneficial to Southside Virginia — better pay for teachers and deputies, improvements to rural broadband, roads and school facilities — and the money to improve this state of affairs has to come from somewhere. So why wouldn’t we support the governor in proposing to derive more taxes from those who are best positioned to pay them? (And who largely made out like bandits with the Trump tax cut in the first place.)

The problem for guys like Frank Ruff, aside from the fact that Northam is sitting across the party aisle, is that tax conformity doesn’t just affect Amazon stiffs — it also inconveniences a handful of well-to-do people in this area who in all likelihood make up a significant portion of Ruff’s donor base. And maybe you were thinking that Ruff was just trying to protect the interests of his struggling constituents all along. A better question is: Since when?

There’s nothing new about this, alas, but as long as Ruff tries to obscure his knee-jerk opposition to tax adjustments that touch the donor class, all the more important it becomes for others to point out the consequences. And the consequence here is that lots of people in the area are struggling — many are the same people who teach our kids, who patrol our streets,who contribute to the day-to-day functioning of our community. They deserve better, and a billion dollars in additional state revenue, achieved without a tax increase, would do considerable good in providing them with higher pay. So who do you want to help? Maybe the likes of Frank Ruff need to have that question posed to them more often.

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