This line really stuck out at many folks during Saturday’s debates, and Greg Letiecq over at BVBL captured the majority of the debate for the rest of the Virginia blogosphere interested in the details.
To quote:
I propose three taxes at the local level that local communities ought to look at, at an optional basis because they are regressive to growing a business, but they ought to look at that in a tax neutral way.
Now it is abundantly clear that from reading this, McAuliffe has no clue how local governments operate much less interact with the state government. Fair enough… so let’s assume for just a moment that McAuliffe isn’t a complete moron and let’s try to take his comments in the context offered.
…and start analyzing the problems from there.
(1) Education is a constitutional requirement of the Commonwealth, not the localities. Section 8, Article 1. Not only that, we are required to maintain a “free and quality” education system — the state “we”, not the local “we”. To date, this is a responsibility that Richmond has been sloughing off on local governments woefully under equipped to meet these burdens.
Why? Because the primary method of taxation localities have are highly-regressive real estate property taxes, followed by even more regressive personal property taxes. For those unfamiliar, regressive taxation is the opposite of progressive taxation, namely that regressive taxes take up more of your income if you are on the lower end of the income scale; not so much on the higher end. For instance, take two families. One family lives in a home valued at $250,000 with a single mother and four children making $35,000. Next door, there is a family with two incomes and no children making $80,000 — same home value. Who pays more?
They both pay the same… and as a fraction of their income, a regressive real estate tax consumes a greater share of the pie for the single mother with little disposable income, than the pie slice of the neighbors next door.
The same basically holds true for personal property (cars) — though it is mitigated by what sorts of cars folks in certain income brackets actually purchase.
The other item localities have at their disposal? Meals tax… which if you are in a rural locality, isn’t exactly enough to tip the scales.
(2) …and for rural localities, there is no commercial base to make a tax neutral shift. In fact, spraying what amounts to bureaucratic Roundup on the green shoots of small businesses and entrepreneurship — precisely the opposite of what we ought to be doing in Virginia.
(3) What’s more, such as “tax neutral” shift from residential to commercial is still passed on to the residential taxpayer. The taxation is still regressive, because now the tax is merely passed on to the individual paying for the services — whatever those services might be…
(4) Oh yeah — and tax neutral = no more money for the locality. That’s sorta the definition of tax neutral. Sure, sure… a McAuliffe policy wonk will argue that the opportunity for greater tax growth exists among the business community rather than property values. They’d be right, too.
But when talking in connection with teacher’s salaries, that is not a problem (if the problem even exists — Virginia ranks at the top of the middle quintile in teachers salaries in America at $48,703 per teacher according to the NEA, and that’s with states such as New York skewing the numbers determining what average base pay nationally ought to be — see charts C-9 thru C-13 on pages 18 and 19 of this report) that the locality is going to be able to shoulder on its own. Not even by a long shot. In fact, one could argue that this is exclusively a state responsibility, with a state obligation to meet the gap.
The problem here is that not every locality is Fairfax. McAuliffe should know this… and not only should he know this, McAuliffe should also understand that the problems we face regarding education are problems that can only be met at the state level — no amount of tinkering is going to fix the fact that Virginia has walked back on its commitments to education in a big way.
Virginia’s education system needs retooling, not a hammer and a box of nails as McAuliffe so meekly suggests. Frankly, the entire system of Virginia taxation needs an overhaul, but bureaucrats and politicians too meek and too afraid to fix the problem are more willing to prevaricate and delay than they are to reform.
Both candidates should go bold and then — once governor — walk back. But if the boundaries for real reform are merely to give localities more regression in “tax neutral” ways? That are optional? How is that going to resolve the very real problems Virginia has regarding teacher salaries? Trading off a professional salary for professional expectations that, for starters, abolish tenure? Getting rid of the Standards of Learning and replacing them with latitude rather than attitude? Paying for health care and the VRS? Creating a climate that ensures Virginia’s education system encompasses all methods — public, private, parochial, and home schooling? STEM-H and a post-secondary system that — while very good — requires a greater focus on workforce development and opportunities for entrepreneurship (read: microfinance) than what localities are able to provide or afford — especially in rural Virginia or places such as Danville or Martinsville that are literally becoming the Detroit of Virginia more by inaction or fear rather than pro-action and confidence.
That’s the conversation I’d rather see.
But regressive taxes to replace regressive taxes at the local level? It’s not innovative — it’s pedestrian.
Go bold or go home, T-Mac.
