It's a familiar problem across the nation. Virginia is facing a significant budget shortfall, and its political leaders are trying to identify the right mix of spending cuts and tax increases to balance their budget. The budget plan announced by Governor Kaine this week is not as progressive as it could be. While it's hard to criticize too harshly most of the individual changes that have been proposed, the Governor does appear to have missed a golden opportunity for more meaningful tax reform. Among the Governor's ideas are:
- Bump the state's cigarette tax rate up by a modest 30 cents. Virginia's cigarette tax is among the lowest in the nation. But as the Virginia Commonwealth Institute points out, the tax is regressive and the revenue it generates will provide little more than a temporary budget fix.
- End the state's yearly $64 million giveaway to retailers by eliminating its "dealer discount" program that allows retailers to pocket a portion of the sales tax they collect as compensation for the cost of collecting the tax. Good Jobs First recently issued a very detailed report on the problems associated with these programs.
- Scale back a credit offered to land-holders who agree to preserve their land. This credit has ballooned immensely in cost in recent years.
But the governor's plan also includes damaging cuts in education, public safety, transportation, and other areas. Rather than slicing funding and jobs from these core areas, the Governor could have followed the lead of the Virginia Commonwealth Institute by proposing to limit the eligibility of senior tax breaks so that only those in need can receive them, or by enacting combined reporting in order to close corporate loopholes. In addition, a much-needed restructuring of Virginia's income tax rate brackets, as proposed by the Virginia Organizing Project, would bring a welcome change to the state's outdated tax system.