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Gov. Bob McDonnell stands accused of sanctioning the biggest tax hike in Virginia history.
The charge has been lodged by Jamie Radtke, a Virginia Tea Party organizer, in protest of the General Assembly’s approval last month of a transportation plan that could raise annual taxes by $1.25 billion a year. McDonnell backed the legislation and hailed its passage as "an historic day in Virginia."
The bill is sitting on McDonnell’s desk and Radtke is trying to pressure the governor not to sign it. She has started a Facebook page and a petition called "Stop Largest Tax Increase in Virginia History." She also narrated a TV ad claiming that McDonnell, who many believe has national ambition, "pushed the largest tax increase in Virginia history." The commercial was sponsored by the conservative Patriot Super PAC and aired in Iowa, site of the first presidential caucuses every four years.
All of this leads to an obvious question: Does the transportation bill call for the largest tax increase in Virginia history? We checked.
The package would generate $880 million a year in new state revenues in 2018 when it is fully phased in, according to a report by the House Appropriations Committee. About $680 million of that sum would come from tax increases.
The legislation would replace the current 17.5-cent per-gallon gas tax with a 3.5 percent tax on gasoline and 6 percent diesel tax at the wholesale level. It would raise the 5 percent sales tax to 5.3 percent and increase the 3 percent motor vehicle tax sales tax to 4.3 percent. It also counts on Congress passing legislation that would give states authority to compel online retailers to collect sales tax.
In addition, Northern Virginia and Hampton Roads would be empowered to impose a 0.7 percent local sales tax and other regional levies that could raise a total of $568 million a year for transportation by 2018.
When you combine the new tax revenues for the state with the potential new levies flowing into Northern Virginia and Hampton Roads, the tax package comes to about $1.25 billion a year
We asked Radtke to back up her claim that it all adds up to Virginia’s largest tax increase. "I’m slammed and don’t have time to pull all that for you right now," she replied in a March 5 email. Radtke added that former Gov. Mark Warner "had the biggest tax increase in 2004, which was $1.4 billion over two years. This one is $1 billion every year. I will see if I can get you more data later."
Radtke never got back to us.
It’s true that Warner’s 2004 tax increase, often described as record-breaking when it passed, originally generated about $700 million a year. So in terms of raw dollars, Radtke has a point: This year’s take hike, with a potential of producing $1.25 billion annually for state and local coffers, would set a high-water mark.
But Radtke may not have chosen the most meaningful way to compare financial data from different points in time. Several analysts urged us to account for inflation.
We followed their advice and found that Warner’s tax hike, in today’s dollars, comes to about $860 million a year. That still falls below the $1.25 billion potential of the bill that awaits McDonnell’s signature.
Warner, however, is not the only governor in Virginia history who pushed through a tax increase that can be compared to the current plan.
In 1986, Gerald Baliles signed a package of tax hikes that raised $422 million for transportation. Adjusted for inflation, it comes out to $893 million in 2013 dollars. That doesn’t beat this year’s bill, either.
But we got a different result when we went back to 1966 and examined landmark legislation signed by Gov. Mills Godwin that created the state’s sales tax.
The legislation phased in a 3 percent state sales tax over about three years to aid public education, help create Virginia’s community college system and pay for some transportation and administrative expenses. In addition, the law allowed counties and cities to enact a 1 percent sales tax, and all localities did that, according to a 1970 publication by the University of Virginia.
The new levies brought in $282 million during the fiscal year that ended June 30, 1970, according to a report that year by the Department of Taxation. Adjusted for inflation, that comes to $1.68 billion today and easily outpaces the tax increase that McDonnell has endorsed.
Radtke said that the transportation package approved by the General Assembly this year amounts to the largest tax increase in Virginia history. Using raw dollars, she’s correct. But that’s not the whole story.
The value of a dollar changes over time. When inflation is factored, the value of legislation approved in 1966 that created the state’s sales tax would be $1.67 billion annually today. That exceeds the $1.25 billion-a-year potential of this year’s bill.
Radtke’s statement is partially accurate but leaves out important information. That makes it Half True.
Email from Jamie Radtke, March 5, 2013.
Virginia House Appropriations Committee, "HB 2313 conference report," Feb. 21, 2013.
Virginia House Appropriations Committee, "HB 2313 conference report regional transportation sources," accessed March 12, 2013.
E-mail from Virginia Slaughter, spokeswoman for the Virginia Department of Taxation, March 12, 2013.
Interview with Ric Brown, Virginia’s finance secretary, March 1, 2013.
Email from Joseph Henchman, vice president of legal and state projects at the Tax Foundation, March 11, 2013.
Interview with John Knapp, senior economist at the Weldon Cooper Center for Public Service at the University of Virginia, March 11, 2013.
Emails from John Knapp, March 11, 2013.
Interview with Larry Sabato, political scientist at the University of Virginia, March 4, 2013.
Gov. Bob McDonnell, "Statement of Governor Bob McDonnell on General Assembly passage of historic transportation legislation," Feb. 23, 2013.
The University of Virginia News Letter, "Virgina Sales Tax: Its origins and administration," April 15, 1970.
The University of Virginia News Letter, "The Virginia retail sales tax," December 1981.
Study by John Knapp and Bruce Johnson of the University of Virginia, "Virginia Issues: The retail sales tax," December, 1981.
Virginia Department of Taxation, "Report of the Department of Taxation to the governor of Virginia for the fiscal year ending June 30, 1970, page 19-20.
J. Harvie Wilkinson III, "Harry Byrd and the changing face of Virginia politics 1945-1966," pages 285-304, 1968.
Bearing Drift, "Guess who owns the largest tax increase in Virignia history?" Feb. 25, 2013.
Bureau of Labor Statistics inflation calculator, accessed March 13, 2013.
Richmond Times-Dispatch, "Warner not gloating after victory on taxes," April 30, 2004.
Richmond Times-Dispatch, "Budget blockade busted," April 28, 2004.
Richmond Times-Dispatch, "A budget at last - It boosts sales tax by a half-cent, raises the cigarette tax levy and caps the phase out of the car-tax cut," May 8, 2004.
Richmond Times-Dispatch, "Baliles scores high with legislators," Jan. 9 1987.
Richmond Times-Dispatch "Gas tax, sales tax, other fees rise today," Jan. 1, 1987.
Richmond Times-Dispatch, "Baliles says he’ll make most of smaller road package," Sept. 28, 1986.
The Washington Post, "2% sales tax is proposed by Godwin," Jan. 29, 1966.
The Washington Post, "Va. Senate adopts Godwin’s plan for sales, auto taxes," March 2, 1966.
The Washington Post, "After roads deal, Virginia Gov. McDonnell faces Republican identity crisis," March 3, 2013.
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