As the debate plays out over Governor Glenn Youngkin’s tax restructuring plan, which includes $1 billion in tax relief over the next budget biennium, rest assured that the opposition party will attack it as a heartless attack on poor and marginalized Virginians with their illimitable unmet needs. In that context, it is worth remembering Virginia’s slow drift from a lower tax/high-growth state into a high tax/slower growth state over the past three decades, and asking if the higher taxes have made life any better.
According to the Tax Foundation, state and local taxes took 12.5% of Virginia’s net product in calendar year 2022 — the eighth-highest percentage among the 50 states. Within living memory, Virginia’s tax burden was in the second-to-bottom quintile. Today we’re in the top quintile. We’re now officially a high-tax state.
The transformation has been fairly sudden. In 1977, the state/local tax take was 11.4%, but a succession of growth-minded governors and legislators pushed it down to 9.7% as recently as 2015. Then taxes went into reverse. State/local taxes rose to 10.9% of the economy in 2019, and 12.4% in 2020, where it more or less stabilized.
The rest of the story is familiar. Economic dynamism has slowed. In the 1990s, the Old Dominion could boast of one of the fastest growing state economies in the country. Today, despite high “best state for business” rankings, we’re in the middle of the pack.
If the rising tax burden had been accompanied by an improving quality of life, the tradeoff of higher taxes for better government infrastructure and services might have been worth it. But does anyone think that Virginia government is delivering more today than it did 30 years ago? Maybe yes, if you’re a beneficiary of Medicaid expansion. But are the roads any better? Has traffic congestion eased? Are the schools better? Is crime down? Has housing become more affordable? Has the general cost of living improved?
Not that I can see. You can ignore me — I’m just a cranky old man. But people are voting with their feet. In the past decade and a half, Virginia has gone from a state that enjoyed domestic net in-migration — more people moved in than moved out — to a state that has been leaking population. We’re not an exporter of talent on the scale of a New York, Illinois, or California, but if we maintain the same tax trajectory, we’re heading in that direction.
— JAB
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