Nearly every blogger, at some point, looks at what they wrote and sees a mistake. Usually, a strikethrough and an UPDATE will suffice for a correction. There are occasions, though, when it requires a little more. This is one of them
It all started when I read Brian Schoeneman’s response to my take on the tax increases in Governor McDonnell’s ABC privatization plan. He wasn’t happy. In fact, he asserted that the tax increases don’t exist. Even though I had addressed each in some detail. So, I endeavored a new post to do it again (and cover points I had missed.
I reviewed the “optional convenience fee” and “wholesale license charge” – and came away more convinced that they are new taxes. I also laid out why the loss of ABC profits cannot qualify as a tax cut; nor can it be used to offest new taxes in this discussion. That is all coming in a post later this evening. This one is to correct my mistake.
I noticed it as I was reviewing what I had said about the revised excise tax. Here’s the verbiage from that post:
The $17.50 per gallon excise tax – This is a little trickier, because as I mentioned here, this is in lieu of a 20% excise tax. Here’s the problem: the figures provided for the license charge (1% of gross receipts), projects revenue of $7.1M. That means $710M in sales is projected. If the old rate applies, that translates to $142M in revenue, far more than the current $111.4M (a sign of greater expected sales), but not the $175.7M that the Secretary of Finance is projecting from the new tax. In other words, this is a de facto $33.7M tax increase.
The “license charge” is the 1% tax McDonnell would impose on wholesalers. It would be one percent of the wholesare’s gross receipts . . . and this is when I realized my mistake. The $710 million I calculated is for wholesale receipts, not retail receipts. In other words, I was comparing apples to oranges.
I have no excuse for this; I goofed, and in this case, the error is very, very significant.
The current excise tax (20%) is applied to the retail price, meaning I needed to include the projected retail markup (25%). Add 25% to the $710 million in wholesale receipts yields a retail receipt total of $887.5 million, for which a 20% tax would yield not $142M, but $177.5M. That’s 1% different from what the proposed excise rate of $17.50 would take, and it’s 1% higher. Translating to English: the revised excise tax is not a tax increase.
So, instead of three tax increases, McDonnell’s proposal actually has two (I still say they are tax increases, for reasons that will be spelled out in my next post). Furthermore, the total tax increase from this is not $60M a year; it’s $26.5M a year.
I apologize to every reader for the error. On the plus side, this means the space between me and McDonnell et al has been cut by more than half, and is now less than 0.1% of the annual budget. I sincerely hope that the Administration and its supporters realize that there are better things to do than risk the privatization plan, which I support, the economy, and the limited-government bona fides of the Republican Party over a mere $26.5 million. There’s already enough in the undesignated surplus to cover eliminating these tax hikes and making privatization a clean bill for the entire 2012-14 biennium.
In the meantime, I have another post to put up, and some crow to stick in the microwave for a midnight snack.
