
RICHMOND, Va – That
didn’t take long. As soon
as discussion began
about what to do with the
massive influx of money
storming into Virginia,
Governor Ralph
Northam rolled out a
plan to spend it.
The current fiscal
year is projected to have
a $555 million surplus
due to the Trump tax
cuts. Lawmakers also are
banking on $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.
Further driving
the economy is an
increase in defense
spending after years of
decline (during which
policy makers frantically
debated ways to diversify
Virginia’s military
dependent economy).
Then there’s the
"free” Obamacare
Medicaid expansion
money, about $2 billion
worth. Also filling the
cash pipeline in the
future is the possibility of
Native American run
casinos as well as sports
betting. As for now,
though, lawmakers must
address what normally is
a noncontroversial issue
— conforming Virginia’s
tax code to the federal
version.
Typically, conforming
Virginia’s tax
code to changes made to
the federal code the previous
year, are unanimous
pro forma votes
taken at the beginning of
each General Assembly
session and signed by the
governor in order to take
affect immediately to
avoid confusion and
properly prepare state
policy in time for tax filings
later in the year.
Getting the two-thirds
emergency vote this year
won’t be so easy.
Republicans, badly split over the issue
of expanding Medicaid
this past session, a split
Northam expertly
exploited to pass the
mammoth record
Medicaid increase, are
united in opposing a plan
he unveiled late last
week. In it he proposes to
expand Virginia’s version
of the federal Earned
Income Tax Credit to provide
"refunds” to low
income Virginians who
don’t owe state income
taxes. General Assembly
Republicans, who have a
one-seat majority in each
chamber, instead calculate
his numbers as a tax
increase on the middle
class people who actually
pay taxes.
Ironically, tax cut
opponents, who typically
groan about their "cost”
to government — as if it’s
the government’s money
— despite the increased
economic activity generated
by the cuts (as is
happening now) that
more than "pays” for
itself, are not at all cautious
about the real cost
of cutting checks straight
out of the state’s treasury
to an estimated 600,000
people who do not pay
state income taxes and
which will cost about
$250 million. The
"refunds” actually would
be direct payments since
there is no overpayment
of income tax to those
individuals.
House Appropriations Committee Chairman
Chris Jones (R-Suffolk)
said there would be serious
consideration of conforming
in areas where
the federal changes
repeal or reduce certain
individual deductions,
but opposed state payments
to those who didn’t
pay taxes. House
Speaker Kirk Cox (RColonial
Heights)
warned that while the
business tax cuts in the
federal law are permanent
the individual cuts
are only for 10 years
pending further action by
Congress, meaning state
lawmakers must project
future revenues before
spending them now.
As usual with
taxes and spending, it’s a
game of semantics; with
the administration and its
allies claiming the federal
tax cuts have increased
taxes on low income
Virginians. Actually,
their overall tax bill has
decreased because of a
much smaller federal tax
liability that overwhelms
a slightly larger state tax.