- The Washington Times - Wednesday, February 7, 2001

It's a classic man-bites-dog story. Virginia's biggest and most influential business groups are supporting higher state taxes and spending. Industry associations ranging from the Virginia Chamber of Commerce to the Northern Virginia Roundtable have concluded that the only way this state can continue to prosper is by adding more beef to the budget, and suspending any talk of tax cuts.

Now the Virginia legislature, controlled by the Republicans, is poised to vote to halt the car tax repeal. Sen. John Chichester, a Republican from Stafford, says halting the car tax repeal is "the only fiscally conservative thing to do." It is also politically and economically blunderous.

At stake here, of course, is whether Virginia voters will get the car tax repeal they have been promised and they voted overwhelmingly for back in 1997 when Jim Gilmore was elected governor. The car tax is the most hated tax in Virginia. It has been half repealed so far. Most Virginians want the levy stamped out completely. I suspect that speaks for the vast majority of business owners and their workers.

Not so the business associations, who supposedly speak for these workers and entrepreneurs. The Virginia Roundtable says that only by suspending the car tax repeal can Virginia "still maintain government's ability to provide priority programs such as public safety, education, and transportation[sic]." They left out corporate welfare payments, on which Virginia spends tens of millions of dollars a year.

The Chamber of Commerce's statement is even more baffling. The Chamber says Virginia shouldn't cut taxes because "erosion of the commonwealth's superior reputation for fiscal conservativism would be a frightful error." This is positively Clintonian rhetoric. What the Chamber is lobbying for is a tax increase (the car tax repeal has already been scheduled to take place under existing legislative agreements) and higher state spending. How is that fiscal conservatism?

Fortunately, Jim Gilmore has refused to knuckle under to the pro-tax business lobby and is fighting to preserve his legacy to Virginia: Complete repeal of the car tax by the time he leaves office. He not only has economic logic squarely on his side, but also a huge majority of the electorate. Now would be the worst possible time to betray the taxpayers in favor of Virginia's tax eaters.

Let's review the facts one more time on the state finances in Virginia. Every time the business groups start their greedy moan for more taxes, they portray Virginia as a state that has been bled of needed tax revenues to fund "essential government services." By listening to the Chamber of Commerce, you would think state lawmakers were living on the Jenny Craig diet plan.

Far from it. According to the National Association of State Budget Officers, last year, the Virginia general fund budget grew by 11 percent. That was the sixth-fastest growing budget of the 50 states. It's 3 times the rate of increase of population growth plus inflation in Virginia. It is twice the rate of growth of the budget of our more liberal-leaning neighbors, D.C. and Maryland. Over the past 10 years, the Virginia budget has more than doubled. How many Virginia families have seen their budgets double?

Everyone in Virginia wants better schools and less congested roads. But it is an absolute canard to argue that we can only have better state services by raising taxes. The state lawmakers would be wise to pay attention to the work of the Virginia Public Policy Institute. The Institute's research shows that very few states have spent more on schools, roads, and highways over the past 10 years than Virginia. The problem for Virginia is that as we keep pouring more dollars into the school system, the class performance remains flat. There has just been no indication that more inputs are producing better output.

Since the early 1980s, Virginia has prospered as few other states have. By some estimates, there are now more high-tech firms and workers in Virginia than in Silicon Valley. There are many explanations for why high tech has found Virginia to be such a hospitable place to do business. It's a right-to-work state. It offers quality public services. And yet the tax burden here is well below the national average. Businesses and high-skilled workers are attracted to low-tax areas. According to research by Ohio University economist Richard Vedder, more than 1,000 people every day move from high-tax to low-tax states.

Economist Zsolt Besci at the Federal Reserve Bank in Atlanta has found that raising taxes is seldom a defensible economic policy for states. To the contrary, Mr. Besci advises that "lowering aggregate state and local marginal tax rates is likely to have a positive effect on long-term growth rates." That's just the opposite of what the Chamber of Commerce is pleading for. It's worth noting that since 1995 more than half the states have cut tax rates to try to gain ground on Virginia.

Virginia businessmen who don't want their tax bills raised should stop paying dues to groups like the Virginia Chamber of Commerce and the Business Roundtable, which are lobbying to do just that. For those who remain, I would simply ask that they stop imposing their masochism on the rest of us.

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