Richmond, VA – In case you missed it, Senator Scott Surovell wrote an op-ed in The Roanoke Times on Governor Youngkin’s irresponsible fiscal promises that would result in an unbalanced budget.
The full op-ed is available HERE and below.
Virginia has a long tradition of balancing our budget and passing budgeting in a fiscally conservative manner. In January, Gov. Glenn Youngkin became the first Virginia governor to propose over $3 billion in tax cuts and spending with no proposal to pay for them.
While his proposal fulfilled a campaign promise, it is hard to take seriously because it would have also resulted in an unconstitutionally unbalanced budget. This is not how we govern Virginia, and the Senate of Virginia has taken a much more prudent approach.
First, it is important to remember that Virginia is a low-tax state. Even though Virginia has the 10th highest median family income among all states in America, WalletHub ranks Virginia as having the 34th highest tax burden in America.
Virginia’s total state and local tax revenue ranks No. 24 on a per capita basis. Virginians are not “overtaxed.”
It is also important to take account of why Virginia’s revenues are up. The federal government has injected $5.2 trillion in stimulus spending approved on a mostly bipartisan basis into our economy over the last two years.
Virginia saw $4.8 billion of funds come directly to the commonwealth during the last budget cycle alone and more than $1 billion of it still will be programmed in the upcoming budget.
Lower interest rates have caused a housing price spike that the Federal Reserve said resembles patterns we last saw in 2005. All of the extra cash in circulation coupled with a tight labor market also causes inflation and when goods cost 7% more to purchase, sales taxes generated also go up by 7%.
When that stimulus spending stops, growth will slow and revenue growth will stall with it and it would not be responsible to construct a budget that locks in new tax rates that assume perpetually unnatural revenue growth. That runs against Virginia’s fiscally conservative traditions that have brought us AAA bond ratings and the lowest borrowing rates.
Gov. Youngkin’s three-month gas tax holiday is also a shortsighted gimmick. First, 30% of Virginia gas taxes are paid by people who live outside of Virginia. Why should we let non-Virginians drive on Interstate 81 and other roads without paying for them for even one day?
Last week, The Wall Street Journal noted that studies have found that another 30% of the benefit from gas tax cuts goes to oil companies and gas suppliers. This was further confirmed last week in a congressional hearing when Rep. Donald McEachin asked every oil company executive if they would commit to reduce gas prices by 18 cents per gallon if the federal gas tax were suspended. All six of them refused.
The Senate of Virginia has already proposed a $300 per person tax rebate that would cover over two years of the gas taxes paid by the average Virginia driver. The House has proposed a slightly larger refund. This problem will be addressed in our final budget.
The proposed Senate Budget also makes prudent one-time uses of our state revenues. Last year, the Virginia Retirement System estimated our unfunded pension liability as over $11 billion. The Senate Budget directs $1 billion toward that shortfall. The Senate has targeted other one-time spending that will not generate ongoing expenditures such as additional funds for affordable housing, capital spending, “Rainy Day Fund” deposits, and one-time bonuses for state employees.
We also have included tax reductions to the targeted populations who need it the most. Over 600,000 Virginians currently receive a refund from their Earned Income Tax Credit (EITC). Twenty-nine other states have made their state EITC refundable and this would target a tax reduction into a well-proven program that has been proven to eliminate poverty over decades.
Finally, these revenues give us an opportunity to address our long-standing underfunding of secondary education, behavioral health, higher education and public safety. All of these investments will pay long term dividends.
The General Assembly is not bound by the unrealistic campaign promises of Gov. Youngkin. Virginia was not recognized as the Best State for Business two years in a row because of reckless fiscal policy. We honor Virginia’s traditions and reputation taking full account of our economic prospects, making prudent investments, and we look forward to reaching a compromise with the House of Delegates.