So says The Commonwealth Institute for Fiscal Analysis. Tuesday’s press release highlights various bills that the Senate Finance Committee failed to pass.
A number of proposals to bring in more revenue to help balance the state’s budget failed to win passage at a Senate Finance Committee meeting today in the General Assembly. Among the many pieces of legislation on the agenda were bills to reinstate the estate tax on estates with values of $5 million or more, double the state tobacco tax, and eliminate the dealer discount program.
“Given the substantial budget shortfall Virginia faces, these important tax policy changes were needed to help balance the budget, close loopholes, and avoid even further reductions in education funding for our children, nursing care for our elderly, and support for cops on the streets of our communities,” said Michael Cassidy, Executive Director of The Commonwealth Institute for Fiscal Analysis in Richmond, Virginia.
The bulk of the bills failed to win passage or were amended to substantially weaken their revenue impact. For example, Senate Bill 987 would have eliminated the discounts that retailers get for transmitting sales tax payments to the state. Elimination would have saved the state $64 million. Instead of taking that approach, an amendment in the form of a substitute was offered by the bill’s sponsor, Sen. Charles Colgan, that would instead require large retailers (those making over $50 million a year) to remit sales tax receipts to the state on an accelerated basis. The approach is essentially an accounting maneuver that brings sales taxes into state coffers ahead of schedule and as a result books $44 million in “new” revenue for 2010.
The tobacco tax increase (Senate Bill 947) would have doubled the current tobacco tax and brought in a total of $154 million in new tax revenue. “We are facing major cuts to our state’s health care system. This new money would have been spent through the state’s Medicaid program for low-income families and matched dollar-for-dollar by the federal government, so it makes sense to use this option,” Cassidy noted. On a tie vote, the committee failed to report the bill.
Senate Bill 1133 proposed to reinstate the estate tax for estates valued at $5 million or more. Despite impacting fewer than 100 estates and bringing in $102 million in new revenue in 2010, the bill failed to secure a motion to report.
“When the General Assembly eliminated the estate tax in 2006, we thought we could afford its total elimination. In today’s climate, it’s clear we can’t. Reinstating a portion of it only on those estates of millionaires who are worth more than $5 million is a reasonable option,” said Cassidy.
To be honest, I have no idea what Senate Finance is thinking. Accounting gimmicks, such as the sales tax manuever, won’t solve the budget problem. While the elimination of the dealer discount would hurt, it would only hurt a little. (And our neighbor the the south, North Carolina, has no such discount.)
Tough times require tough measures. I’ll be interested to see what “fees” end up being increased to cover the budget shortfall.
VIVIAN J. PAIGE | All Politics is Local 