The Commonwealth Institute for Fiscal Analysis released a report (pdf) this morning which assesses the cost of Virginia’s tax expenditures. Calling it a $2.5 billion drain on revenue, the Institute says that these expenditures – tax exemptions, exclusions, deferrals, credits, or preferential rates in the tax code – are implemented and then forgotten.
In a conference call earlier today, Institute Executive Director Michael Cassidy pointed out that Gov.-Elect Bob McDonnell, like his opponent, Creigh Deeds, called for better performance management. One of the recommendations of the report is to regularly publish “a tax expenditure report that is accessible to the public, broad in scope with detailed information, and with an analysis of whether the programs are meeting stated goals.”
The Institute takes no position on the relative merits of the various tax expenditures, the largest of which is $950 million for car tax relief. What it is attempting to do is point out that these items should face the same scrutiny as other budget expenditures.
I think that’s a pretty good idea.
VIVIAN J. PAIGE | All Politics is Local 
“The Institute takes no position on the relative merits of the various tax expenditures, the largest of which is $950 million for car tax relief.”
That is unadulterated BS. They’re playing a language game, and calling something which allows a taxpayer to keep his or her own money a “tax expenditure” is a value-laden perversion of the language. You might legitimately call them “tax breaks,” but calling them “tax expenditures” presumes — wrongly — that the government is spending money, when it is merely eschewing the taking of someone else’s funds.
If the goal is to earn more tax money, this report would accomplish the opposite. Publishing a register of tax cuts and exemptions would only make them more popular and allow people who were ignorant of them before to make full use of them.
The goal here is not to raise money. The advice is to take a look at these programs we have built into the tax code and assess whether they are actually achieving their intended goal. It would be akin to looking at MACRS on the federal level and seeing whether that actually encouraged greater capital investment as it was intended to do.
Like the land conservation credit, how much land did we intend to preserve via this credit? And is the credit actually meeting that goal? And is that more effective than the government just purchasing the land directly?
This is something as the report says we never do. We don’t do it at a federal level and we don’t do it at a state level. The problem is that certain folks are able to get these credits added into the code for their benefit. And it gets to be a form of government subsidy that never gets looked at.
Exactly right. One thing that was mentioned in this morning’s call was specifically about the land preservation tax credit. It was tweaked to allow a smaller amount of credits to be used in a given year but the length of time to claim the credit was increased. It seems to have had no effect on the amount of land being preserved but spread the cost out over a longer period.
The purpose of the paper is what you described, but it would be hard to argue the end result desired by the authors would be anything other than eliminating tax expenditures.
That’s a leap. If we evaluate these things to be ineffective or just a waste, we could just as easily lower the overall tax rate to make their elimination revenue neutral. I’m sure Republicans could get behind that.
This appears to be only one of only two examples (the estate tax repeal being the other) in the entire report where the intention of the reduction is not to forward some policy objective other than reducing tax revenue (on the face of it anyway). But looking at the whole report, they haven’t taken a position on what they classify as tax expenditures. They include the Virginia EITC, the reduction in sales tax on food, and the exemption of sales tax on school lunches, for example. And there is nowhere that says one should stay or one should go.
James:
Um, no. You have this wrong. From a state budget perspective, the car tax relief is indeed an “expenditure.” It’s money the state pays out to the localities to cover part of the car tax bills of citizens. That’s what was essentially wrong with Gilmore’s “No Car Tax” proposal (aside from the fact that it was dishonets, becaus there was NEVER a plan to eliminate the tax totally). It’s not a tax cut. Even by Republcian logic, it didn’t make sense. No tax was reduced. The localities still collect the same amount, the state just takes part of the income and sales tax you pay and uses it to pay part of your car tax bill. This is an expensive bureucatic boondoggle. Money is sent to Richmond only to be sent back to the localities. If you really wanted to eliminate the tax, it would take a constitutional amendment. At this point it would just make more sense to agree that the “car tax cut” has served the only purpose it was designed for — to get Gilmore elected — and let localities charge and collect the whole thing again. That would also fill about half the hole in the state budget.
They are expenditures, but they are still essentially tax cuts; basically a re-distribution of money (not wealth).
Think of it like Cap and Trade and Health Care Reform. You have taxes and then you have tax expenditures to help you pay for the new taxes…
No, they aren’t. The amount being paid is still the same, the only question is which pocket it comes out of.
I much prefer a car tax over local income taxes, such as those imposed by Maryland localities. One can always choose to drive a clunker and not pay a property tax.
Yes, it is a silly shell game that the government plays — send money to Richmond to have it sent back to the local governments. The feral government plays the same games with block grants, education spending, Medicaid, and every other program in which feral government money is administered by the States.
“If we evaluate these things to be ineffective or just a waste, we could just as easily lower the overall tax rate to make their elimination revenue neutral. I’m sure Republicans could get behind that.” -tx2vadem
We should do that with actual expenditures, too. How many times have we heard that some program will save money? OK — prove it. If you can’t, then cancel the program.
I can’t believe someone wrote, “If you really wanted to eliminate the tax, it would take a constitutional amendment.”
That is not true. Any tax can be repealed by the Assembly and the Governor.
Millions of Virginians really hate that car tax. Our citizens hated those county stickers on their windshields, the most. Some counties, like Henrico, no longer use those stickers and about the same number of citizens pay their taxes on time, anyway.
Eliminating the car tax is STILL a good idea. It was so popular that it got a very unpopular guy, Jim Gilmore, elected as Governor.
Like the study of tax credits implies, looking at the real benefit of such programs would be a value-added activity, but only if the evaluation was done honestly. That won’t happen under the Republicans; they owe too much to the multinationals.
It will especially NEVER happen under McDonnell. The big corporations will still get their special tax deals, and McDonnell will be handing over Virginia assets to his corporate backers, all while the working class will get it in the shorts.
The sad truth about many tax credit programs is that they are specifically inserted into our laws in order to provide payback for big corporations who shelled out big bucks to get their lackeys elected.
This is why we desperately need campaign finance reform here in Virginia.
1. Eliminate corporate contributions. Corporations are profit making entities whose by-laws mandate that they expend money only with the expectation of a return on that investment. This is rightfully perceived by the citizens as corruption.
2. Eliminate PAC contributions.
3. Restrict contributions to come only from citizens whose PRIMARY residence is within the district.
4. Cap the amount to the federal limit for an individual contribution.
These reforms will amplify the voices of the citizens who reside in the respective districts, and restore the representative relationship between our elected officials and the citizens who reside in their areas of representation.
One change to #3: Only registered voters may contribute.
As for #4, I don’t really care. If one can only contribute to one candidate, everyone will know if he tries to buy that candidate, and will not vote for the guy.
Article X, section 4 of the Virginia consittution specifies that the personal propety tax is reserved for localtiies. To change that, to eliminate the car tax, would require a constitutional amendment.
I would agree with all of those, but only if there are some serious reforms in our media, by reforms I mean legislatively. If your going to cap donations you have to make it a requirement that local media cover elections in depth. I’m talking candidates get a short column in every paper, a story on every newscast, an interview on every radio station. This would happen daily or weekly during election season with both candidates getting equal time/space. Mandatory debates at high schools or something like that too. People raise money to get the word out, if we give them free and easy ways to do it for them then they dont need money.
Max: Bingo. The rising costsof campaigns is driven by the high cost of advertising (in addition to the ridiculous amount of money candidates, particularly Dems, pay consultants). While forcing newspapers to cover one thing or another is a violtation of the First Amendment, the public airwaves, both radio and television, belong to the public and are merely leased to broadcast stations. They can be forced to provide time as a public service.
I like the idea of mandatory debates too, but I’m not sure how you’d enforce it.
I don’t think it would be a violation of the first amendment. We might have to compensate the papers, but I would think it is currently illegal for a paper to refuse to display a government notice when properly compensated.
Mandatory Debates would be self-enforced. If one candidate does not one to come than the other just gets all the time to himself.
Article X, section 4 of the Virginia Consittution does not specify a tax on Cars, Steve. It just delegate the right to tax personal property to the localities.
The tax on cars could be excluded whenever our elected representatives redefine what can be taxed and what can’t.
I guess some lawyer might read these to mean something else, but it looks like the Assembly could kill the car tax by legislation…
ARTICLE X
Section 1
“…the General Assembly may segregate the several classes of property so as to specify and determine upon what subjects State taxes, and upon what subjects local taxes, may be levied.”
Section 4
“Real estate, coal and other mineral lands, and tangible personal property, except the rolling stock of public service corporations, are hereby segregated for, and made subject to, local taxation only, and shall be assessed for local taxation in such manner and at such times as the General Assembly may prescribe by general law.”
I think you missed this part (emphasis mine):
So I agree with Steve here. The fact that tangible personal property (which includes cars) is segregated means the GA cannot kill the car tax without amended the constitution.
(The section is here.)
When the Constitution has, “…General Assembly may prescribe by general law…” that means that the Assembly is given the authority to make changes, including, as in this case, defining whether or not personal automobiles will be included in the definition of, tangible personal property, or not.
I do not dispute that the car tax could be killed by an amendment, but that ham-handed approach is unnecessary, if the General Assembly prescribes, by general law, an exclusion of personal automobiles from the definition of personal property.
I know you’re smarter than that, Tyler. Only by ignoring the first part of the sentence can your “solution” work.
Tangible personal property is expressly segregated as subject to local taxation. There are, no doubt, court cases which define what constitutes tangible personal property. And you can bet that if the GA tried your approach, every locality in the state would file suit claiming the law unconstitutional.
You’re forgetting Virginia is a Dillon’s Rule state.
The VA Constitution, in effect, bars taxation of personal property by the State, but allows localities to tax property by those means permitted by the General Assembly.
“and shall be assessed for local taxation in such manner and at such times as the General Assembly may prescribe by general law.”
So, yes, a simple act of the General Assembly can eliminate the car tax, real estate tax or any other property tax, it just can’t impose state level taxes on those properties.
Again, thank your choice of deity for Dillon’s Rule.