With the revelation that Virginia is running another gigantic surplus, the debate over the budget and taxes is heating up again. The terms of debate, as I argue in this week’s Bacon’s Rebellion, have shifted decisively in favor of the low-tax advocates.
Last week, Jerry Kilgore argued that the surplus proves that last year’s tax increase was not needed. Now the House of Delegates is in an uproar. As Michael Hardy sums up yesterday’s developments in the Richmond Times-Dispatch: “Some House Republicans, still smarting over [Mark Warner’s] success in winning passage of a record $1.4 billion in tax increases last year, renewed cries that the package was unnecessary because of substantially higher-than-predicted rates of state tax collections.”
House Appropriations Chair Vincent F. Callahan, R-Fairfax, estimated that the state will have an extra $500 million at the end of the fiscal year — presumably over and above the $900 million or so surplus that the Warner administration had anticipated back in December/January and the General Assembly spent, mostly on transportation.
Del. R. Steven Landes, R-Augusta, was particularly harsh in his criticism of the Warner administration: “You all have the worst record of any administration,” he told Finance Secretary John Bennett at a House hearing. Del. Leo C. Waldrup Jr., R-Virginia Beach, characterized Warner as acting like “Chicken Little” about state finances.
Bennett conceded that the state needed to improve its forecasting ability. But the issue really isn’t the Warner administration’s forecasting record. Forecasting is inherently a hit or miss proposition; no one is very good at it. Warner’s mistake was justifying tax increases based on six-year projections that a long-term, structural budget deficit would leave Virginia unable to meet core obligations. Long-term forecasts are even more uncertain than short-term forecasts. Moral of the story: Don’t increase taxes on the basis of shortfalls that might materialize some hazy time in the future.
Virginia never needed the 2004 tax increase. It’s time to talk rollback.