The path of tax reform

By PRESTON BRYANT
DEC. 1, 2003

Preston Bryant is a Republican who has represented Lynchburg and part of Amherst County in the Virginia House of Delgates since 1996.

The early fallout has been pretty predictable. Warner saw a bunch of his fellow Democrats say his plan is the greatest thing since the AFL-CIO. That effusive praise, however, was offset by a number of hell-no Republicans who'll vote for nothing that smells like a tax hike. And then there's what may be a bipartisan majority of the otherwise Republican-controlled General Assembly that's seemingly decided to take a wait-and-see approach, wanting to learn more of the plan's details while also seeing how it's playing on the home front.

Warner's plan is both broad and simple. It touches on everything from the state sales tax to the personal income tax to corporate taxes, estate taxes, tobacco taxes, food taxes, and retirees' tax breaks.

The sales tax goes up. Personal income tax brackets are readjusted. Some corporate tax loopholes are closed. Estate taxes are (mostly) eliminated. The levy on smokes goes up. The tax on food goes down. And pensioners' standard deductions are scaled back.

Oh, and then there's that pesky car tax. Warner's plan also sets the car tax on a path toward complete elimination, subject to certain fiscal conditions.

So what's it all mean, practically and politically?

Practically speaking, at the end of the day, it's a $1.2 billion tax increase over the next two-year budget cycle. This chunk of change, though, will be nicked from the wealthiest one-third of Virginia taxpayers, while the other two-thirds -- those with low and moderate incomes -- purportedly will see, on balance, their taxes go down.

Warner's tax-reform plan is designed to help budget-writers meet skyrocketing costs in Medicaid, pay for unmet needs in secondary education, restore cuts to colleges and universities, stash a few extra bucks into our rainy day fund, and preserve our historic, money-saving triple-A bond rating.

The governor will barnstorm across Virginia over the next six weeks billing his plan as one giving us the best of all worlds: one that allows us to invest the way we must in necessary services and infrastructure while holding harmless, arguably, most taxpayers. He's also determined, it seems, to privately raise and spend a couple of million bucks on a PR blitz to sell this message. Some will buy it, some won't.

There probably will be agreement reached on some elements of the Democratic governor's plan while lines are drawn in the sand over others. A few GOP leaders have already indicated a willingness to raise the tax on cigarettes and means-test seniors' very generous tax deductions. And there also may be bread broken over eliminating the so-called "death tax," which under Warner's plan will apply only to estates valued at more than $10 million, thereby not harming most mom-and-pop businesses and family farms.

That which will draw the most fire is Warner's one-cent sales tax increase. It'll be criticized as a 20 percent tax hike that hits the poor the hardest. Warner's opponents also will take shots at his readjustments to the personal income tax brackets, which he's apparently designed to shift the tax burden from the lowest income earners to the highest. The poor, his critics will say, don't pay income taxes anyway, so all the governor has done is stick it to "the wealthy."

And here's where a regional fight will break out. If Warner's reform plan is structured to make those with upwards of $150,000 incomes pay more in taxes, then Northern Virginians will scream it's a tax hike directed at them. Such incomes set against their cost of living, they'll say, should not be considered "wealthy." Rural Virginians, they'll yell, are - once again - benefiting the most from Northern Virginians' hard-earned success.

Politically speaking, expect to see (or hear stories of) Republicans and Democrats meeting quietly among their own troops to determine how voting this or that way on Warner's plan can be exploited for maximum strategic advantage. A vote for Warner's plan will go down as supporting "the biggest tax increase in Virginia history." A vote against Warner's plan will be portrayed as voting against cutting taxes on the majority of Virginians, cutting the tax on food, and getting rid of -- once and for all -- the hated car tax. Some may even be accused of sticking it to old folks.

The great fear out there among those looking ahead to the upcoming 2004 General Assembly session is that such rhetoric might hang in the air long enough to lead to the oft-envisioned "train wreck," where the Republican-controlled House of Delegates, which is less likely to work with Warner, and the Republican-controlled Senate, which is more likely to do so, will let philosophical differences lead to an impasse, thereby derailing the important work of government, not the least of which is adopting a new biennial budget.

It's obviously not in the GOP's best interest to let that happen. When such a standoff occurred in 2001 -- and the legislature went home without a budget in hand -- voters agreed with then-candidate Warner that it was time for a change, not to mention leadership.

So if state Republicans want to see their all-but-certain 2005 gubernatorial nominee, Jerry Kilgore, have his already good chances diminished, then yet another headline-grabbing failure on the leadership front is likely to do it.

The tax-reform picture is at present a fuzzy one. Its success or failure lies largely in Republican legislators' hands. Let's hope that at least some semblance of meaningful reform takes place so that Virginia moves forward.