Rahn resigns from Economic Advisory Board over transportation tax hike.

A reader passes on the following — the resignation letter of Richard Rahn from Gov. McDonnell’s Joint Advisory Board of Economists:

Dear Governor McDonnell:

I regretfully tender my resignation as a member of your Joint Advisory Board of Economists.

The reason for my resignation is that I strongly disagree with the new tax/transportation bill that you supported. Unfortunately, I was not asked for my advice (which I assume was also true of the other Joint Advisory Board members) before you and the legislature embarked on passing the largest increase in taxes in the history of Virginia. This action will do damage to the people of the Commonwealth of Virginia.

The business climate and economy in Virginia have been at or near the best in the nation because Virginia has maintained a relatively small state government. The new taxes and spending will grow the size of the Virginia government relative to state’s GDP – a large and unnecessary step backwards.

The new sales taxes and user fees should have been offset, at the minimum, with a reduction in the state income tax. As you know, Virginia relies more heavily on the income tax than most other states, and it is perhaps the most destructive tax. With the new increase in the marginal tax rate at the federal level, the combination of the Virginia and federal income tax at the top rates is well above the revenue maximizing tax rate.

A number of other Republican governors are supporting major rate cuts in their state income taxes, and in several cases proposing to totally eliminate the state income tax. Virginia should be doing the same. I am fully aware of the cost of the increasing federal mandates, particularly Medicare, on the Virginia budget. However, again other states are finding ways to deal with it without increasing taxes.

Virginia has been innovative in the past for bringing more private sector funding for transportation infrastructure. These programs should be greatly expanded, as should programs to privatize parts of many other functions now performed by the State, which could be better done, in whole or in part, by the private sector. More innovative thinking would enable Virginia to reduce tax burdens (again particularly the income tax) while at the same time giving the citizens a higher level of service.

I am prepared to volunteer time to assist in a serious effort to reform the Virginia tax structure – which is badly needed.

My resignation should not be taken as anything more than a policy disagreement over the tax issue, for I have a very high regard for the professionals in the Virginia state government, including the Department of Taxation and, in particular, the director and chief economist of Revenue Forecasting, John R. Layman. Also, I do recognize and applaud the many positive things your administration and the legislature have done to enhance the well being of the citizens of the Commonwealth of Virginia. .

Sincerely,

Richard W. Rahn

Not consulting the in-house economists on the transportation bill? Not good. And Rahn is one of the best in the business, so his insights would have been worthwhile — though it is important to note from his letter that Rahn is willing to volunteer his time for an effort to reform the state’s tax code.

I suspect someone will take him up on that offer quite soon.

  • Talk about scandal… that’s incredible/outrageous/blind.

    More to the point, the state tax code top to bottom needs reform — and when it is reformed, a deep and abiding conversation about the relationship between localities and Richmond needs to take place.

    I’m firmly convinced that a state constitutional convention is going to be required to fix the problems, but perhaps a 20 year band-aid could be produced through state tax reform. I’m equally optimistic and cynical in that regard.

  • Not surprising since McDonnell has all but admitted he has not read or reviewed the bill, nor did many that voted YES.
    http://www.williedeutsch.com/bob-mcdonnell-fighting-for-a-bill-he-hasnt-reviewed/

    • So who DID read the bill? And I guess we must also ask – who wrote it? Are we now passing bills to find out what’s in them?

    • sparkyva

      Yep, 2.4 billion for transportation, no lock box so state can grab it anytime they need it. In addition, everyone is calling the tax hike necessary for transportation. That is a bald face lie. The tax hike is 6.1 billion. Take out the 2.4 and you are left with a hike of 3.7 Billion for other stuff. If the majority of the tax hike is for other stuff, don’t hide behind transportation as the reason you voted for it. Our problem is that the Democrats hold a majority in our state. They have at least 21 senators and a clear majority in the House as well as controlling the Governorship. If it walks like a duck, quacks like a duck then it is a democrat pretending to be a republican.

  • Doug Knack

    So, Mr. Rahn, where were you for the last 6 months when the discussion of the transportation issues were all over the media? And, of course, you don’t have to worry about Transportation issues, personally, as you live in NOVA the land of new roads and no recession.

    Seriously, if this guy was a real leader, when he read about the transportation packages, he would have called the Governor and said,here are the issues, here are some ideas for solutions.

    The problems with our transportation infrastructure have been 30 years in the making. And the biggest issue has been our legislators, “R” or “D”, have refused to address them until our roads are worse than those in third world countries.
    Thanks for your service, bye bye!

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