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What to Do With All That Cash?
By Stephen J. Rossie

Square2017 imageRICHMOND, VA – Tim Kaine has the distinction of being the only Virginia governor in recent history to leave office with less revenue coming into the state than when he began his term. Ralph Northam licked that problem in his first year as Virginia may see record revenues, in large part due to the Trump tax cuts that have put Virginia’s economy in overdrive to the tune of an estimated additional $500 million annually.

But that’s not the only revenue stream pouring in. There’s a sudden $300 million in projected Internet sales taxes due to a recent decision by the U.S. Supreme Court that now allows states to tax online purchases. The General Assembly long has salivated over this opportunity, so much so that years ago it passed a trigger clause to start collecting the money once Congress repealed its prohibition. The court’s decision beat Congress to it and was a plum bonus to General Assembly appropriators.

Down the road there’s the real possibility of casinos thanks to Native American Virginia tribes that once dismissed such ideas in order to get their long-sought federal recognition. Sooner to be up and running is sports betting, also due to a late spring Supreme Court decision. Then there’s the 90 percent federal match of Obamacare Medicaid expansion funds — about $2 billion worth — the commonwealth agreed to accept this spring.

Just as with any money coming in to Richmond, all this new money must go flowing out. For the time being, per the new budget, any surplus will go into the commonwealth’s two reserve accounts.

But that hasn’t stopped the governor from making plans. There’s talk of partnering with the Washington Redskins to bring that team to Virginia. It has estimated a $1 billion price tag for its dream home.

Late last week he also floated an idea of making refundable Virginia’s version of the federal Earned Income Tax Credit. Now, low income Virginians can claim a credit against their income but if the credit exceeds the amount they need, they bottom out at zero tax. Under Northam’s plan they would be able to claim a refund of whatever the excess is.

The House’s budget kingpins, Speaker Kirk Cox (R-Colonial Heights) and Appropriations Committee Chairman Chris Jones (R-Suffolk), did not receive it warmly and warned it would stick the middle class with higher taxes to make up the difference. They insist on a broader tax reform that benefits all Virginians, ignoring that prolific spending is the primary stick that whacks most Virginians.

The General Assembly, through a commission, has studied tax reform for years now. No one seems to know what it is considering. But here’s a thought or two.

Once taxpayers pay the bills lawmakers run up, return the surplus to them instead of reloading the reserves, which are really extra piles of money to be spent. Start by permanently eliminating the immoral sales tax on items necessary for life. For example, food — whether in a grocery store or a restaurant. Food isn’t a luxury.

While there is no tax on over-the-counter drugs, the state needs to go all the way on medical supplies. Why does it tax bandages, soap or skin lotion, for example? But if lawmakers truly want reserves, they need to sock away their windfalls now for when Obamacare is fully repealed, or financially collapses, and they are stuck with the Medicaid expansion bill all by themselves.

Stephen J. (Steve) Rossie is a Richmond-based public and government relations’ consultant. He has been a General Assembly lobbyist since 2006 and has written about Virginia government since 2007.

 





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