There has been talk, and some legislative action, about rationalizing the carve outs and special breaks embedded in Virginia’s tax code. These special deals all begin with the premise that they will support/encourage/stimulate certain kinds of investment or activity. Sometimes they do, but all of them do violence to the notion that taxes should be broad, fair and transparent.
The action in the General Assembly to find out which of these breaks are working and which aren’t seems like a good start. But the aim of the panel given this task has quickly moved toward one seeking more revenue for the state, not a better tax system.
In reaction to this, Del. Ben Cline has just introduced a bill — HB 2381 — that would shift tax savings from special classes to the broader taxpaying public, and make them permanent. The summary reads:
Individual income tax rate. Reduces the top marginal individual income tax rate, currently 5.75 percent, whenever an individual income tax credit expires. The 5.75 percent rate would be reduced by an amount that generates approximately the same amount of additional annual revenue anticipated to be received from the expiration of the credit. The Tax Commissioner would determine the amount of the reduction rounded to the nearest 0.05 percent.
The adjusted tax rate would become effective beginning with the taxable year immediately following the first taxable year for which the credit is no longer allowable.
If the 5.75 percent rate is ever reduced to a 0.00 percent rate for a taxable year, then the 5 percent marginal income tax rate would be imposed on all taxable income in excess of $5,000. Currently, the 5 percent marginal income tax rate is imposed on income in excess of $5,000 but not in excess of $17,000.
The provisions of the bill would become effective beginning with the 2015 taxable year.
Is it a perfect solution? I would also like to see Virginia index its tax rates to inflation (yes, it still exists). But Cline’s bill is an effort to keep money in (more) taxpayers’ pockets, rather than adding new dollars to the state’s coffers…where it will be immediately spent.
Now to see if Republicans — in an election year — will follow Cline’s lead.
