Taxing and spending in Virginia

Column by Ken Plum

Political pundits are continuing to debate the meaning of the outcome of the recent Virginia elections. While the elections were state-level only, some voters came to the polls with federal issues in mind – what some called socialized medicine, rising federal deficit, bailouts, continued wars, and the president himself. There may have been little nexus between their issues and the persons for whom they did or did not vote, but it was clear that some people were interested in “sending a message.”

One generalized concern is related to government taxing and spending. Certainly it is a legitimate issue at any time, but one I hope at the Virginia state level can be pursued based on factual information. Virginia did not become recognized by independent assessments as the best-managed state and the best state for business without significant controls on its taxing and spending policies. According to the Tax Foundation, Virginia has the 45th lowest state and local tax rates when compared to income of taxpayers.

During the past decade the Virginia General Assembly has made significant changes to tax policies that will reduce tax revenue available to the general fund by $1.878 billion in the next biennium. In 2004 Gov. Warner’s tax-reform legislation produced what is described in political campaigns as the greatest tax increase in Virginia’s history producing about $1.6 billion per biennium for the state’s budget. Seldom mentioned in those political campaigns are the biennial tax reductions enacted during the decade lowering tax revenues available to the general fund by $3.478 billion.

Tax cuts during the decade included for each biennium $1.9 billion car tax cut starting in 1999, estate tax repeal in 2009 for $280 million, and reduced sales tax on food in 2006 for $381 million. Low income tax relief was granted in 2000 and 2007 for $125 million. Tax credits were extended for historic rehabilitation in 1999 for $92 million and for land preservation in 2003 for $300 million. In 2009, $400 million in insurance premium and recordation tax revenues were shifted from the general fund to transportation.

With the tax cuts and tax-policy changes made during the past decade, Virginia will have nearly $1.9 billion in fewer dollars available to the general fund budget for the next biennium than it would have had without these cuts and changes. At the same time the state’s revenues have declined 9.2 percent this year for the greatest decline in 70 years. The state’s spending will be reduced to keep the budget in balance. A more accurate portrayal of the Commonwealth’s experience in the last decade might be tax and spending cutting and budget balancing.


Ken Plum is the chairman of the House Democratic Caucus. He represents the 36th District in the House of Delegates.

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