Senator discusses state tax reform

Column by Emmett Hanger 

Wait a minute! We are talking about reforming Virginia’s antiquated tax system, and I mean really, actually debating the pros and cons of revising Virginia’s tax structure. For years, the need has been there, but it was more convenient to sweep things under the carpet rather than talk about it. Now it’s actually a focus, and if we (those of us elected to make decisions in Richmond on behalf of our neighbors) do our job, then we can make significant progress this session.

First, let me say that while I certainly do not agree with Gov. Mark Warner on all major points of his tax-reform agenda, I applaud him for working in good faith with the legislature in pursuit of meaningful reform, and I respect the fact that he has worked diligently in making the tough choices to bring spending in line with current revenues.

Quite frankly, there have been some who espouse conservative viewpoints that in practice were a part of significant increases in state spending prior to Gov. Warner’s term of office. But now, rather than pointing fingers of blame, we can address the current circumstance and propose changes that, if enacted, will lay the groundwork to insure that Virginia remains a state where we can take pride in the opportunities that we provide for all of our citizens; rich and poor, young and old, gifted and challenged, eighth-generation and newcomer, and of course all of those somewhere in between.

Reform should, in my opinion, focus on changes that make the system as fair as we can make it for individual taxpayers and the various counties, cities and towns throughout the state. Reform should focus on making the system as simple as we can make it, although sometimes simplicity must be sacrificed to make adjustments to achieve fairness. Reform should make the system contemporary and predictable. Finally, reform must address the issues involving adequacy of revenue and distribution of that revenue.

We began the serious movement to tax reform with a citizen commission that submitted a report in 2001. This commission worked on a revenue-neutral plan that attempted to address disparities in funding and inequities in the system. Then a legislative commission of which I was a part worked for two years and submitted a report last winter. The work of these two commissions serves as the basis for the development of a plan that the commission that I currently co-chair with Del. Harry Parrish, R-Manassas, is working on and that Gov. Warner has drawn from in making his plan.

The governor’s plan, and the plan that Del. Parrish and I plan to introduce, are not identical, but there is a significant amount of agreement, and I believe a consensus can be reached that is acceptable to a majority without compromising the goals of either party.

In general, I believe that equity can more closely be achieved by putting more emphasis on personal-income tax and sales tax and reducing the pressure on local property taxes.

In a nutshell, on personal income tax, we need to increase personal exemptions, increase standard deductions, change the tax brackets to make the system slightly progressive as it was originally, and means-test the age deduction. On sales tax, we need to extend the tax to retail sales on the internet as a fairness issue, take the tax off of food, and increase the rate if necessary to balance the budget. We should not extend the sales tax to services. On the reduce-tax side, we need to repeal the estate tax and finish repealing the car tax and more adequately fund local services to reduce pressure on real-estate taxes and fees. On the increase-tax side, we are looking at a modest increase in the cigarette tax and the gasoline tax.

I perhaps have been guilty of focusing to much attention on potential shortcomings of the governor’s plan, relative to what I think conservative Republicans will support, but you know what … we will work that out in the legislative process. Sen. John Chichester, R-Stafford, chairman of the Senate Finance Committee, and Majority Leader Walter Stosch, R-Glen Allen, will have a significant hand in directing a positive outcome on the Senate side, as will Del. Parrish, chairman of the House Finance Committee, and Speaker William Howell, R-Fredericksburg, on the House side.

We are capable of building the needed consensus so long as the debate is conducted in good faith with broad participation from Virginians of all walks of life. We will fail in our efforts if we rely on partisan rhetoric and allow extremist anti-government groups based outside of Virginia, such as Americans for Tax Reform and the Club for Growth, to dictate to us what an acceptable outcome will be. Let’s make Virginia a leader in advancing principles of good government, again.