More Virginia Revenue Shortfalls in the Aftermath of a Tax Increase

A dozen years ago, Governor Mark Warner, his fellow Democrats, and a slew of Republican legislators chose to enact a billion-dollar-plus tax increase. Over the next few years, Warner’s successor – current VP nominee Tim Kaine – dealt with budgetary shortfalls that totaled anywhere from $5 billion (Fact Check) to $7 billion (Politifact) depending upon the source.

Three years ago, Bob McDonnell, a majority of his fellow Republicans, and nearly all the Democrats chose to enact another billion-dollar-plus tax increase…and his successor is facing the latest round of budget shortfalls totalling over $3 billion (Virginian-Pilot).

Now, as they say across the Atlantic, a swallow doesn’t make a summer (and neither does a pair of them). One can look to a number of reasons and correlations: the presence of two Governors who are Democrats, the economic uncertainty that comes with the late stages of an economic expansion (although it is far less likely that it will end in 2016, as it did in 2007), etc.

However, one of those correlations worthy of examination needs to the tax increases. Indeed, one could argue a similar fate even fell Doug Wilder, who faced revenue issues within four years of a major tax increase (1986).

Those who have read this space for the last half-dozen years will take my criticisms at tax hikes with little surprise (and more than a little exhaustion). That said, one of my continuing criticisms of them is that they do not bring in the revenue expected of them. Far too often, tax hike proponents act as if the people would make no changes to their behavior as a result of the tax. Then after the tax increase is enacted; people change behavior; and revenue projections fail.

The most glaring example came at the federal level in 1990, when President Bush the Elder and Democrats in Congress agreed on a tax increase package that was to raise $167 billion over five years. It barely reached $30 billion.

I would not claim similar disasters in Richmond, but I will note that the next time a Delegate, State Senator, or Governor projects what a tax increases will raise, it would be best to expect something considerably less.

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