While the news of a budget “surplus” is certainly positive, it is important not to let the notion of a budgetary “surplus” distract us from the real and serious problems we have with our revenue system in our state, problems that run much deeper than just the impact of the Great Recession.
Remember, news of a “surplus” this year doesn’t tell us what we did to achieve that budget “surplus.” Virginia cut funding in a wide array of arrays and continued to use budget gimmicks to keep the books in balance.
When we look closely, Virginia has serious structural problems in the way we raise the resources we need to provide for public services in our state and invest in our future.
- Virginia has grappled with budget shortfalls in 10 of the last 12 years. Reliance on deep cuts, one time budget balancing tools, and gimmicks got us through the worst of the recession, but the structural problems still exist and will resurface.
- Since the onset of the recession in 2007, state personal income has increased roughly three times as fast as state general fund revenues. But state general fund revenue as a share of personal income has fallen. Had the share remained constant, Virginia would have nearly $3.9 billion more in general fund resources to invest over the next two years.
- Costly tax breaks, like lowering taxes for certain industries or giving a special break to people who buy certain products, cost Virginia billions of dollars each year. They are baked into the tax code but are not subject to the same regular scrutiny or evaluation as other types of state spending.
- Fully taking into account Virginia’s growing population and the rising cost of providing key services, current investment in our economic building blocks like education, health care, and transportation, falls about $4.8 billion short compared to pre-recession levels.
Virginia’s largest sources of general fund revenue – the individual income tax, the corporate income tax, and the sales and use tax – are insufficient because they are outdated, narrow, and inadequate in the context of Virginia’s modern economy. As a result, they fail to produce enough money to adequately invest in core public programs and services that build the economy.
State Income Tax
Virginia’s basic income tax structure has not been touched since 1987; a quarter of a century ago. Since then, however, the income distribution has shifted, with income growth heavily concentrated among higher income households. Yet we’ve done nothing to adjust for that reality. Prior to 1987, we adjusted the basic structure to account for this change on average every 3 to 4 years.
Corporate Income Tax
Over 60 percent of Virginia corporations paid no corporate income tax in 2008, though it is likely many of them had taxable profits. In addition, a growing share of total income taxes are paid by individuals and a shrinking share are paid by corporations because the tax code has fallen behind key changes in business models and practices as well as the creation of numerous special tax breaks.
Sales & Use Tax
Sales tax revenue as a share of total general fund revenue has steadily fallen since 1977, largely driven by changes in what Virginians are buying and how they are buying it. The marked shift in consumption from goods to services and the rise of Internet shopping mean that less and less of what people buy is even subject to taxation under current law in Virginia.
When it comes to raising revenue to fund the core functions of our public structures, Virginia is frozen in time. What we need is a 21st century revenue system for a 21st century economy. We cannot afford to continue demonizing taxes or pretending that if we ignore them, we can reach our potential as a state or as a community. Planning for the future by modernizing Virginia’s revenue system will help the Commonwealth maintain its competitive edge and maximize future prosperity.
Read more in our latest analysis about Virginia’s outdated tax structure, Frozen in Time.
Despite 'Surplus,' Virginia's Revenue System Can't Pull Its Weight
“This is a presidential candidate on a trip designed to bolster his foreign policy credentials, who is literally next door to the greatest foreign policy crisis of the new decade. And, as the fire rages down on Aleppo, he apparently has nothing to say about it at all. No criticism of Russia, no gesture of support for Turkey. No half-sentence about arming rebels, or not arming rebels, or UN resolutions, or anything. Look, I’m not saying it’s easy, but damn it man, you’ve got to say something.” —Is Mitt Romney a hawk or just a tactless weirdo? Hugo Rifkind ponders the question (via timesopinion)
“When gays get so angry about a chicken sandwich, it is because Chick-fil-A has given around $5 million to fight to discriminate against us. When we praise brave Eagle Scouts who give up their badges in protest of the Boy Scouts of America’s prejudice, it’s not about scoring political points; it’s because there are kids in dens who are being taught to believe that they are less than equal. When we rant about the pastor who preaches that gays should be thrown into a concentration camp, we scream out of fear. And our fears are justified — in the last seven days, a lesbian in Nebraska was carved with a knife, a gay man in Oklahoma was firebombed, and a girl in Kentucky was kicked and beaten — her jaw broken and her teeth knocked out — while her assailants allegedly hurled anti-gay slurs at her.” —Conor Gaughan - “We Are Not Arguing Over Chicken” (Huffington Post)
“After Seung-Hui Cho killed 32 people in Blacksburg, media attention focused on the likelihood that a Korean culture unwilling to acknowledge mental illness helped drive the young man to commit the worst mass murder in U.S. history. After Maj. Nidal Hasan carried out the Fort Hood shootings, his Muslim faith became all the public needed to know about his motive. … [But] when white men commit mass murder we don’t hear how their skin color, their maleness, or their social class were contributing factors to their acts.” —Hugo Schwyzer (via andrewgraham)
“One of the worst ways to stop someone from telling sexist jokes is to tell him the joke isn’t funny. He’ll assume that you’re humorless and that he needs to save the good stuff for the right audience. If you really want someone to stop telling sexist jokes, you need to tell him, “I don’t get it” and then step back as he tries not to say, “It’s funny because women are stupid.” —
If This Isn’t From a Book, It Should Be (via ceedling)
Note: This applies to any form of disparagement humor.