Wednesday, February 10, 2010
Editorial: No new tax cuts
Talk of eliminating any local revenue stream makes no sense while services are stretched thin.
From the RoundTable blog
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Some Virginia lawmakers want to take the new governor's pledge against tax increases up a notch. As the state prepares to whack billions of dollars more from essential services, the House is giving a serious hearing to a bill that would eliminate a local revenue stream.
This is insane.
Nevertheless, House Finance Committee Chairman Bob Purkey, R-Virginia Beach, proposes to phase out the machinery and tools tax that localities can levy on manufacturing equipment. Last week, the bill won a subcommittee's backing by a 7-1 vote.
Cities and counties that depend heavily on that money would be pinched, he acknowledged. But, he reasoned, eliminating the tax would attract new industry, so revenue would increase eventually. Maybe. Sometime.
Revenue for whom? Not, at least directly, for the cash-starved localities he proposes to rob.
If, as a result, more industries actually did move into our already business-friendly state, the Virginia Municipal League notes that state, not local, government would get the lion's share of new revenue, through income taxes.
The commonwealth doesn't let localities tax income. Purkey's bill, H.B. 613, would take away one of the revenue crumbs Virginia does allow localities to pick up.
Besides, cities and counties are desperate for more revenue now. For the state to mandate less by eliminating one of their sources without a suitable replacement should be unthinkable.
Local governments are facing deep cuts in the money they get from the state, and they are experiencing their own concurrent drop in tax revenue as the effects of the recession wear on.
Granted, when the state's general fund finally recovers, localities can expect to benefit -- though whether Richmond will restore aid at least to pre-recession levels cannot be assumed, given the shrink-government rhetoric now in vogue.
Assuming the best, though, localities would get an indirect benefit from growth, for whatever reason, in the state's income tax collections. And the machinery and tools tax itself is not sacrosanct. It is an inadequate, inefficient, unfair holdover from the industrial age that needs updating for the digital age.
Yet, Purkey's timing and his chain-saw approach to tax reform as tax elimination portend ill for Virginia's future in the near and the long term. He's also sponsoring legislation, H.B. 119, which would abolish Virginia's corporate income tax. Fortunately, Gov. Bob McDonnell has shown little enthusiasm thus far for his fellow Republican's tax elimination inclinations.
The commonwealth indeed would benefit from comprehensive tax reform, something that generations of complacent lawmakers have declined to tackle. Now is not the time to take wild stabs at select pieces.
Cities and counties can't afford further blood-letting. They need more money now -- to maintain and improve their schools, keep their streets safe, pick up the trash and provide the infrastructure that supports day-to-day life in their communities.
Anti-government ideology won't get the snow plowed.
