Thursday, February 24, 2022
On the campaign trail, Glenn Youngkin said Virginia's economy was "in the ditch." Now that he's governor, he's calling for a host of tax cuts he says will jumpstart what he calls a "rip roaring" economy. He wants to eliminate the grocery tax, double the standard deduction and postpone an increase in the gas tax.
But Senate Democrats are skeptical.
"Companies are lining up — let me repeat that — lining up to come to Northern Virginia. Would they be doing that if we were taxing them out of existence? I mean give me a break," said Majority Leader Dick Saslaw this week. "How do you explain that and the fact that virtually none of us here ever get emails saying 'Oh geez you need to cut taxes?'"
During a tense meeting of the Senate Finance Committee this week, newly installed Secretary of Finance Stephen Cummings said the cost of government is outstripping economic prosperity. He pointed to data showing sluggish job growth, warning senators that revenues are strong because taxes are too high. The governor is hoping the job-growth numbers will be a persuasive argument for Senate Democrats who are skeptical of moving forward with his package of tax cuts.
"We have to be able to explain why we are not growing then because I understand that people are not complaining right now that ‘you're taxing me too much,’ but why is it we're lagging all these other states?" said Cummings. "Why are we lagging the national economy? There's got to be an explanation."
"Companies are lining up — let me repeat that — lining up to come to Northern Virginia. Would they be doing that if we were taxing them out of existence?"
— Senate Majority Leader Dick Saslaw
THE EXPLANATION for Virginia's languid recovery from the pandemic downturn might be explained by related data on unemployment. Because Virginia's unemployment rate was so much lower than other states, many experts say, the commonwealth has less ground to reclaim. States that have seen supercharged job growth are also states that suffered a much higher unemployment rate when the economy shut down.
"A state like Florida that is more tourism and travel dependent was hit much harder at the beginning of the pandemic," said Chris Wodicka, senior policy analyst with the Commonwealth Institute. "If you measure 'recovery' in the way the administration seems to be measuring it, Virginia will look worse just based on that alone."
House Republicans tried to get Virginia to leave the Regional Greenhouse Gas Initiative, a multi-state compact created to cap and reduce emissions across 11 states. But Senate Democrats rejected that idea, which means Virginia will remain part of the group despite opposition from conservatives who say it's a drag on the economy. Critics of the environmental policy Democrats put in place when they were in charge say mandating green energy is a recipe for disaster.
"RGGI is a real and growing tax on power and companies cannot evade it by taking a third party provider," said Stephen Haner, a senior fellow at the Thomas Jefferson Institute. "And until the election there was a strong reason to worry this year could bring repeal of the Right to Work law."
IN THE COMING weeks, Senate Democrats and House Republicans will need to hammer out their differences on tax cuts. The House wants to eliminate the grocery tax while the Senate wants to let local governments keep the option to have a 1 percent sales tax on groceries. The House wants to double the standard deduction while the Senate wants to study the idea and come back to it later. And the House wants to delay an increase in the gas tax while the Senate rejects that approach.
The bottom line is that the Senate budget has about $3 billion more in revenues than the House budget. That could end up meaning less spending on everything from environmental preservation projects to economic development programs.
The Senate budget has $278 million more for public education, for example. Cummings says that kind of austerity is needed to make Virginia more competitive with other states, a perspective Saslaw rejected in trademark fashion.
"Listening to you, you'd think we're in the poorest, most bankrupt state in America and everything has gone to hell in a handbasket," said Saslaw.
"Saslaw can't be paying much attention to his constituents if he thinks cost of living and inflation isn't a major problem for Virginia families," said Macaulay Porter, spokeswoman for the governor.