ICYMI: The VA budget process should not be driven by reckless promises
Richmond, Virginia – In case you missed it, Senator Scott Surovell wrote an op-ed in the Roanoke Times about Governor Youngkin’s irresponsible tax promises that would result in an unbalanced budget.
The full editorial is available HERE and below.
Virginia has a long tradition of balancing budgets and passing a budget in a fiscally conservative manner. In January, Governor Glenn Youngkin became the first Virginia governor to offer more than $3 billion in tax and spending cuts without offering to pay them.
If his proposal fulfilled a campaign promise, it is difficult to take seriously because it would also have resulted in an unconstitutionally unbalanced budget. This is not how we govern Virginia, and the Virginia Senate has taken a much more cautious approach.
First, it’s important to remember that Virginia is a low-tax state. Even though Virginia has the 10th highest median family income among all states in America, WalletHub ranks Virginia as having the 34th highest tax burden in America.
Virginia’s total state and local tax revenue ranks 24th on a per capita basis. Virginians are not “overtaxed”.
It’s also important to consider why Virginia’s revenue is up. The federal government has pumped $5.2 trillion in approved stimulus spending on a mostly bipartisan basis into our economy over the past two years.
Virginia saw $4.8 billion in funds flow directly to the Commonwealth in the last budget cycle alone and more than $1 billion will still be scheduled in the next budget.
Lower interest rates have caused housing prices to spike, which the Federal Reserve says resembles patterns we last saw in 2005. All the extra cash in circulation associated with a labor market tense also causes inflation and when the goods cost 7% more to purchase, the sales taxes generated also increase by 7%.
When this stimulus spending stops, growth will slow and income growth will stagnate with it and it wouldn’t be responsible to build a budget that locks in new tax rates that assume perpetually unnatural income growth. This goes against Virginia’s conservative tax traditions that have earned us AAA bond ratings and the lowest borrowing rates.
Governor Youngkin’s three-month gas tax holiday is also a short-sighted gimmick. First, 30% of gasoline taxes in Virginia are paid by people who live outside of Virginia. Why should we let non-Virginians drive on Interstate 81 and other roads without paying them for even a day?
Last week, The Wall Street Journal noted that studies have found that an additional 30% of the benefits of gas tax cuts go to oil companies and gas suppliers. That was confirmed last week at a congressional hearing when Rep. Donald McEachin asked all oil company executives if they would commit to cutting gas prices by 18 cents a gallon if the tax federal government on gasoline was suspended. All six refused.
The Virginia Senate has already proposed a $300 per person tax rebate that would cover more than two years of gas taxes paid by the average Virginia driver. The House offered a slightly larger refund. This issue will be addressed in our final budget.
The Senate budget proposal also makes prudent one-time uses of our state revenues. Last year, the Virginia Retirement System estimated our unfunded retirement liability at over $11 billion. The Senate budget devotes $1 billion to this shortfall. The Senate has targeted other one-time spending that will not generate ongoing spending such as additional funds for affordable housing, capital spending, Rainy Day Fund deposits and one-time bonuses for state employees. .
We have also included tax reductions for targeted populations that need them most. More than 600,000 Virginians are currently receiving a refund of their Earned Income Tax Credit (EITC). Twenty-nine other states have made their EITCs refundable, which would seek a tax reduction in a proven program that has been proven to eliminate poverty over decades.
Finally, this revenue gives us the opportunity to address our long-standing underfunding of secondary education, behavioral health, higher education, and public safety. All of these investments will pay dividends in the long run.
The General Assembly is not bound by Governor Youngkin’s unrealistic campaign promises. Virginia has not been recognized as the best state for business two years in a row due to reckless fiscal policy. We honor Virginia’s traditions and reputation by giving full consideration to our economic prospects, making prudent investments, and we look forward to reaching a compromise with the House of Delegates.