Bacon's Rebellion

Democracy Thrives in Sunlight

The Implications of the Super Surplus are Sinking In

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by

James A. Bacon
in

I’m not the only one to be fixated on the ever-growing state surplus, which the Associated Press now pegs at $1 billion this year. (I presume that’s over and above the surplus talked about in January, which the General Assembly largely funneled into road projects, though I’m not sure.) Arlingtonian Tim Wise over at the Growls blog quotes The Washington Post and Richmond Times-Dispatch:

According to the Post, the Secretary of Finance “told the Senate Finance Committee that tax collections have increased by 15.2% over the first 11 months of the last fiscal year . . . well ahead of the official forecast of 10.3% growth for fiscal 2005, which ends in two weeks. Revenue grew at an even higher rate in May, increasing by 23% over last year.” The AP story in today’s Newport News Daily Press points out, “Even without last year’s $1.4 billion tax increase, revenue would have been up 19.2% last month.” The bottom line, as usual, seems to be provided in a Richmond Times-Dispatch editorial: either Governor Warner’s fiscal analysts “are woefully off base in their revenue projections . . . or Warner and his staff continue lowballing estimates in order to increase support for the Governor’s political agenda.”

Everyone has their own idea of what to do with that money. My personal favorite is to give it back to the taxpayers. One place to start looking for ideas might be the Freedom & Prosperity Agenda unveiled by a coalition of Virginia conservaties in April. Just to get the conversation started, here are some of that group’s ideas:

  • Eliminate the War of 1812 tax (BPOL)
  • Pass a Taxpayer’s Bill of Rights (TABOR)
  • Eliminate the Death tax
  • Eliminate the prepayment of the Sales and Use tax
  • Constitutional Amendment to base real estate taxes on the acquisition value of the property
  • Proposals for new taxes must contain sunset provisions
  • Eliminate the car tax

For details on the Freedom & Prosperity Agenda, click here.

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Comments

  1. Laszlo Avatar
    Laszlo

    Drive much. It’s transportation.

  2. James Atticus Bowden Avatar
    James Atticus Bowden

    I’ve written and mentioned to several delegates, including the Speaker, that they should build a macro-economic model of the VA economy. We have some of the brightest econometrics guys in the world in the Commonwealth – including my former boss from West Point’s Department of Social Sciences. It would cost under $1m depending on how much labor – and vetting it at universties you did. Or you could spend a couple of million. The result is something that would make far better predictions that the tax revenue estimates we have now. I wonder what models they use today? Dart board?

    My delegate asked me to draft the bill and I failed to get it done – real day job and other excuses…

  3. Paul Avatar
    Paul

    Are any revenue predictions ever correct? The feds missed by trillions recently.

    The problem with the language “eliminate the car tax” is that you’re not eliminating it. You’re just increasing the state payoff. The result is revenue neutral.

  4. Shaun Kenney Avatar
    Shaun Kenney

    Great point Paul.

    What we need is some real tax reform — something simple enough to be painless to implement.

    That’s something the policy wonks should be working towards; a new system of taxation rather than the byzantine structure we have today.

  5. Jim Bacon Avatar
    Jim Bacon

    How about a “flat tax” for Virginia’s income tax code? Throw out the three or four dozen special exemptions, estimated to cost a billion dollars or more per year, and cut the top tax bracket from six percent to five? Make it revenue neutral.(Those numbers may not work out exactly, but you get the drift.) That’s as simple as can be — and good policy.

  6. Anonymous Avatar
    Anonymous

    How about we put the “surplus” dollars into the Raney Day Fund.

    Or we deal with Transportatoin…

    OR, we take care of the $2 Bil in K12 expenses and several hundred millions for higher ed in next biennium.

    The freedom from prosperity agenda is great … it will provide freedom from any taxation and responsibility, it will ensure propsperty for no one and a crumbeling education system.

    My favorite is people that don’t think taxes pay for things.

    “I want to cut taxes and spend more on education.” HUH?

  7. Mitch Cumstein Avatar
    Mitch Cumstein

    Yeah, Flat Tax! Thanks, Jim. It’s about time someone starting pushing this simple, equitable yet frequently demonized idea. Imagine each of us paying the same percentage of our income in taxes regardless of how much we make. Imagine residents not being penalized for being successful and making more money and thus contributing more to the economy. What a concept!

  8. James Atticus Bowden Avatar
    James Atticus Bowden

    Anon: You can cut taxes at any level of government to a point of diminishing returns – and we are far from that – and raise revenue. That is how you cut taxes and spend more on education. Even JFK knew that.

  9. SDH4VBT Avatar
    SDH4VBT

    First, go back and re-read my Sept. 7 2004 Rebellion “Reality Check.” If Bennett is talking about $600 milion, I bet when we we the real accounting the unreserved balance will be the first one over $1 billion since 2000. (I’m going to go out on a limb and predict it will actually be a higher percentage or gross revenue than it was in 2000, which is the real measure.)

    The unreserved balance is the figure that is cash in the bank COB June 30, before the excess is parceled out to the Rainy Day Fund, the Water Quality Fund, etc. Those actually become 2006 appropriations. When it suits their purposes, Governors have a habit of lowballing the surplus number by focusing on the mandatory spending. But zero in on the bottom line “unreserved balance.”

    There is a new state law on the books that requires the final unspent cash to go only for one-time projects. You can expect that the House will push some into transportation and other capital costs. But mainly its the Governor who gets first crack at deciding how to allocate it.

    Some should go to transportation and its fine if mainly goes to alternaitve forms (rail, mass transit, congestion management projects), local matching funds). As for future tax cuts, then the argument gets to be to you expect this hot revenue to continue.

  10. SDHaddendum Avatar
    SDHaddendum

    Oh, and I forgot to report that at an event Thurdsay His Excellency announced that the 2006 budget bill would be in an entirely new format, more reader friendly. Maybe. I’ll crawl out on a limb and make another prediction: it will be in such a format that the sad wonks like me who enjoy tracking the budget won’t be able to make easy comparisons from year to year another. New categories means apples and oranges. Be careful what you ask for.

  11. Terry M. Avatar
    Terry M.

    Agencies are scrambling right now to make a July 15 deadline to revise their strateic plan and budeting to fit a new schema based on “Service Areas.” This is something coming out of the Council on Virginia’s Future. I’m not sure it will actually make things more readable, but will be interestingly new.

  12. Anonymous Avatar
    Anonymous

    Jim:

    The problem is that we already pretty much have a flat tax. The top bracket is roughly $17k. Our tax code looks like it was set in the 1920s.

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