Every year, the Americans for Tax Reform Foundation and the Cost of Government Center release the Cost of Government Day Report. The report measures the calendar day until which the average American must work to pay off their share of spending and regulatory burdens imposed by all levels of government: federal, state and local. This year, Virginia “celebrates” its Cost of Government Day seven days after the national average on July 15. In order for residents of the state to pay off their share of spending and regulatory costs they must work 204 days – longer than 38 other states.[i]
Flawed fiscal practices in Virginia have led to Cost of Government Days falling beyond the national Cost of Government Day celebration. In the past, the Commonwealth State’s Cost of Government Day occurred earlier than the national average; 2012 marks the fifth consecutive year that state has the same or more expensive Cost of Government Day than the national average.
As Governor Gilmore – a Republican dedicated to phasing out the personal property taxes placed on automobiles, finished his term, the state’s Cost of Government Day fell on June 14 – two days before the national average of June 16. However, afterGovernor’s Mark Warner and Tim Kaine, , Virginia residents watched their effective cost of government soar. By the time Governor Tim Kaine left office, the state tumbled and the taxpayers worked to pay for government until nine days after the national average on July 19 in 2010.[ii]
This fiscal irresponsibility coupled with massive tax hikes is the culprit of Virginia’s expensive Cost of Government Day. Cumulatively, over the last ten years, residents have experienced a $6.04 billion increase in taxes. In other words, between 2003 and 2012, taxes have increased by $759.64 for each man, woman and child. The state’s state and local tax burden ranks 33rd nationally at a rate of 9.1 percent, below the national average of 9.8 percent.[iii] In 2004, Governor Mark Warner, along with Democratic and moderate Republican legislators, implemented a “reformed” tax code in the Commonwealth. These reforms permanently expanded the state and effectively cost taxpayers $1.5 billion annually. Taxes included in the tax package were:
- Sales tax increase by ½ percent – the state’s first statewide sales tax increase since 1986
- Cigarette tax increased from 2.5 cents, the lowest in the country, to 30 cents per pack
- Imposed a $950 million annual cap on the car-tax reimbursements that the state makes to cities, counties and towns- effectively increasing car taxes in some localities
- Imposed larger standard deductions and exemptions for individual income taxes BUT implemented higher tax rates on the very wealthy
During Warner’s time in office, the fiscal budget grew 22 percent and the Cost of Government in the state of Virginia increased.[iv] By the time Warner left office in 2006, the Cost of Government Day in Virginia was only one day less than the national Cost of Government Day.
Tim Kaine, voted into office in 2005, followed Warner’s lead and handled shortfalls by hiking taxes. During his time in office, Kaine increased taxes and grew the size of government. The Transportation Funding and Reform Act of 2007, intended to improve roadways and traffic flow, created abusive driving fees and did not relieve congestion. Additionally, the reform act created and delegated to regional unelected officials – giving them the authority to increase taxes within their regions. The abusive driving fees were a slew of taxes implemented on reckless driving residents in the state of Virginia. The fee collected up to $3,000 for driving violations including:
- Driving on a suspended license – a fine of $250
- Reckless driving – a fine of $350
- DUI and related offenses – a fine of $750 due to the court upon conviction and then two additional payments of $750 due to the DMV at 14 and 26 months after the conviction
- Other driving misdemeanors – a fine of $300
- Felony convictions related to driving – a fine of $1000 due to the court upon conviction and then two additional payments of $1000 due to the DMV within 14 and 26 months of conviction[v]
Within one year of the Transportation Reform and Funding Act of 2007, the abusive driving fee and the unelected regional officials’s taxing authority were declared unconstitutional. However, a variety of taxes still remained. In order to make up for a $1 billion shortfall in transportation funding, after the Virginia Supreme Court voted parts of HB 3202 unconstitutional, Governor Kaine and legislators increased the gas tax on diesel fuel. Republicans vehemently argued against increasing taxes in the state but termed the gas tax as an “equalizer” to justify their support of the increase. The tax was regarded an “equalizer” in that the tax on diesel was increased so it was equal to the tax on gasoline. In addition to raising the gas tax 17.5 cents on diesel fuel, other taxes on retail sales and hotels were increased.[vi] Today, the state still suffers from frustrating traffic congestion, poor roadways and unfinished rail lines, on top of the more than $1 billion annual increase in taxes felt by taxpayers.
Virginia continues to face an expensive Cost of Government Day under Governor Robert McDonnell. In 2011, the governor began to turn things around and began to feed the state healthy fiscal policy. Running budget surpluses of $228 million and $545 million in FY2010 and FY2011 respectively, the state showed solid economic growth. However, the Cost of Government, this year, falls seven days after the national average as taxpayers still feel the impact of 2004 and 2007 tax increases. In a state riddled with various taxes, the legislature recently approved an $85 billion budget for FY2013-2014 that includes another fee for DMV services. The hike is equal to an additional $10 million in fees for drivers in the state of Virginia. The increase in DMV fees mirrors some of Governor Kaine’s enactments in the Transportation Reform and Funding Act of 2007. The state continues to fall back on transportation levies to raise revenue.
While Governor McDonnell has prudently cut spending during his time in office and reduced the Cost of Government Day by two full days when compared the to the national average, Virginia legislators still fail to realize the burden that increased taxes place on the state. Since 2002, residents have been encumbered by poor tax and spending policy. Until spending cuts are made in unison with positive tax reforms, Virginia will continue to “enjoy” a Cost of Government Day falling beyond the national average.
[i] Bowe, Devin. The Cost of Government Day Report 2012. The Americans for Tax Reform Foundation and Cost of Government Center. http://www.costofgovernment.org/announcing-release-2012-cost-government-day-a177
[iii] Virginia. The Tax Foundation. http://taxfoundation.org/state-tax-climate/virginia
[v] House Bill 3202/Chapter 896. Civil Remedial Fees, New Virginia Code §46.2 -206.1. http://www.thenewspaper.com/rlc/docs/2007/va-drivertax.pdf
[vi] Virginia Department of Motor Vehicles. Fuels Tax General Information. http://www.dmv.virginia.gov/webdoc/commercial/taxact/general.asp
Devin Bowen holds a B.S.B.A. in Economics from Duquesne University and is currently a second year Mercatus Center M.A. Fellow in the Department of Economics at George Mason University. Her primary research interests include, tax policy, financial regulations, and international policies. In March of 2012 she was awarded the Thomas Jefferson Fellowship at the Cost of Government Center at Americans for Tax Reform. She can be reached at firstname.lastname@example.org