Virginia’s taxaholism

The Virginia legislature opens it 2004 session this week under the cloud of Gov. Mark Warner’s proposal for the largest tax increase in the state’s history.

The proposal includes a 22 percent increase in the sales tax, from 4.5 percent to 5.5 percent. It includes a 10 percent increase in the top income tax rate in the state, from 5.75 percent to 6.25 percent.

In the future, it would raise income taxes on seniors age 62 to 64, and on some seniors 65 and over, by eliminating or reducing current income exemptions for them. It would also increase the cigarette tax by 10 times and give local governments the authority to triple that.

The plan throws some bones to taxpayers, like finishing the phase out of the car tax over an excessively long four more years. But overall the plan would raise state taxes by a record $1 billion over the next budget cycle.

The governor says the tax increase is needed to cover continued budget shortfalls after recent severe budget cuts. Indeed, he has successfully sold this line to the weak Virginia media.

But annual state spending has been increased by $2.5 billion since the governor entered office, not cut. The state budget is now at the highest level in history, up $6 billion, or 28 percent, over the last five years.

Moreover, the governor now proposes with this budget a whopping 13.2 percent increase in this budget cycle over the last one. Without the supposedly essential $1 billion tax increase, state spending would still increase a way too high 11.3 percent.

Adopting the largest tax increase in the history of Virginia so it can increase the next budget by 13.2 percent, instead of 11.3 percent, would be serious taxaholism. Obviously, tax revenues are rising too rapidly and need to be cut, not increased.

The voters have already spoken, and overwhelmingly rejected, the main revenue raiser in the governor’s package, the 22 percent sales tax increase. In November 2002, Northern Virginia voters rejected an increase half as large by a margin of 55 percent to 45 percent, even though foolish business special interests spent $2.5 million to hoodwink voters into supporting the idea. In Tidewater, voters rejected the same increase Mr. Warner now proposes by a smashing 63 percent to 37 percent.

To come back now and ask the legislature to approve the same tax increase that voters in the two most populous, and liberal, areas of the state recently rejected so decisively is a shocking display of anti-democratic arrogance by the governor, as well as deep taxaholism. Is Virginia to be governed by the people, or by special interest, anti-democratic elitists?

Mr. Warner clearly thinks the voters are too dumb for the tax issue to be subject to democracy. He deliberately waited until after the election to release his record tax-increase plan precisely to preclude voters from having a say in the matter. He even bragged to The Washington Post about this anti-voter strategy.

This is the same Mr. Warner who ran for governor in 2001 with a huge ad campaign saying he would never dream of raising taxes, and that his opponent, Mark Earley, was a scumbag politician for even suggesting he would. He sees no dishonor in now proposing the largest tax increase in the history of Virginia. The state is now all the way back to taxation without representation.

The sharply higher income tax and sales tax rates will prove to be powerful disincentives, discouraging increased saving, investment, job creation and economic growth in the state. The proposal will hit Northern Virginia, which has significantly higher incomes and sales per capita than the rest of the state, the hardest. The region already gets back only 46 cents out of every dollar that goes to Richmond, and this huge tax increase will only make that worse.

But perhaps the region deserves that, with local leaders like Bill Lecos, president of the Fairfax Chamber of Commerce. Mr. Lecos is out vigorously cheerleading for this tax whacking of his region and the very people he is paid to represent.

To Mr. Lecos, higher taxes and government spending equals higher quality of life, even when the higher taxes are in Northern Virginia and the higher spending is in Roanoke. Mr. Lecos should be managing the Howard Dean campaign in the state.

With Republicans firmly in control of the legislature, the governor’s proposal should already be dead. But a cabal of Senate Republicans, led by Finance Committee Chairman John Chichester, support a similar tax increase package.

Any Republican who votes for the record tax increases proposed by either Mr. Warner or Mr. Chichester will have a scarlet T emblazoned on his or her forehead for the next 10 years. The taxpayer groups will have a concrete, critical vote to prove to constituents that their supposedly Republican representative is actually a taxaholic Howard Dean liberal. These Scarlet T Republicans can expect a primary challenge every election until they are out of the legislature.

Grassroots Republicans and taxpayers are entitled to fight for what they believe in and against what they don’t. And what they believe in is maximizing taxpayer freedom and overall economic prosperity, not Swedish socialism.

Stephen Moore is president of the Club for Growth, and Peter Ferrara is president of the Virginia Club for Growth.