Virginia: Facing a Tax Hike
James Gilmore
Former Governor of Virginia
Wednesday, February 18, 2004; 1:00 p.m ET
Virginia's budget is about to change, but it will be at the expense of the Commonwealth's tax payers. While education, health care, and transportation will be financed, tax payers will bear the burden of increased sales taxes, tobacco taxes, gasoline taxes, and car taxes.
James Gilmore, governor of Virginia from 1998 to 2002, questions the legitimacy of these tax hikes. He will be live online on Wednesday, February 18, at 1ET to discuss Virginia's response toward higher taxes.
Submit your questions and comments before or during the discussion.
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washingtonpost.com:
Welcome to Live Online with former governor of Virginia, James Gilmore. He's ready to take your questions.
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Brandermill, Va.:
Governor Gilmore, where would you cut Virginia's budget? What do you think of the cuts that Governor Warner made?
James Gilmore: Budget creation is an extremely compllicated process requiring the full resources of the finance department, economic advisors, and business leaders who advise the Governor. The process is one of making hte best possible estimates based on all information as to resources and then using all tools to balance the budget. The use of financial instruments, such as bonding and appropriate reductions are dependent upon the situation at the time of budget creation. The important message is that you have to want to hold the taxpayer harmless then you will manage and govern to that goal, minimizing cuts. The budget that is presently offered is not a reform. It is a simple tax increase on the people of Virginia, but a true reform is in fact called for now that we have experienced a national recession and are beginning to emerge from that recession.
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Centreville, Va.:
When you were Governor, the GOP Senate opposed your last budget because you wouldn't tax and spend like they wanted. Then, under Governor Warner, they not only endorsed his record setting tax plan, but proposed their own, even higher taxing plan. Is there something in the water on the Senate side?
James Gilmore: Many Senators from both parties have chosen the path of tax increases as their preferred way of governing. While I have chosen a different path, to protect the taxpayers, the Senators can certainly offer up their approach. My concern expressed on the op-ed pages is that the Senators from both parties, and even a select few member of the House of Delegates, owed it to the people of Virginia in the last election to place their program of tax increases openly and honestly on the table in their campaigns. Many ran on the platform of n"o tax increases", deliberately misleading their constituents. This issue of integrity in campaigning, and in our democratic process, is the central concern expressed in my op-ed piece on Monday.
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Virginia:
Your "ax the tax" movement was a brilliant political move. It got an issue to people at the same time they were getting hit with their car taxes. But would you admit that the tax cut was a Byzantine scheme to give back a tax and that the tax is still on the books in most Virginia localities and that people will still pay the tax above the $20,000 amount even if the tax give back goes through completely?
James Gilmore: The car tax is, in fact, still on the books in the localities. As I was departing office, I proposed that there be a genuine reform which would remove the tax altogether in return for tax reform. A one term Governor has difficulties driving home this kind of reform particularly in the last year. The key point is that the localities gave up nothing in taxes and are being completely reimbursed. It is often said in the press that the localities suffered some loss because of the car tax cut. This is not true.
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Midlothian, Va.:
What kind of programs will these new taxes go to? Healthcare? K-12 education? Transportation? Homeland security?
James Gilmore: The correct expenditure of revenues is always a judgement call based on priorities. The correct way to make a budget is to focus the funds on the most important priorities and then judge the need of the taxpayer for his money against the less important projects. It is very clear that in the years ahead the Medicaid issue will have to be addressed by all the states with the federal government. The continued growth of this program will continue to press the budgets of the states no matter what the economic health of the nation or the state may be.
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Washington, DC:
Solid evidence shows that raising cigarette taxes reduces teen smoking and promotes public health -- and brings in needed revenue to boot. Why not raise Virginia's lowest-in-the-nation cigarette taxes?
James Gilmore: Virginia's cigarette tax is low relative to other states. The tobacco companies do not seem to be raising any objections to such a tax increase. On the other side, we have to remember the interests of those adults who smoke and who are politically disempowered and will bare the cost alone of such an increase. Also, we have in Virginia thousands of persons employed in the tobacco industry, an industry which does not exist in many other states. I support the reduction in teen smoking and, in fact, negotiated those provisions on behalf of Virginia when I Attorney General.
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Arlington, Va.:
Devolution has given states greater flexibility with federal programs, yet less funds. Now the Feds are providing states with less. Do you have any hope of persuading Congress and the White House to provide more funds to states? Of course, do you believe they should provide more funds to states?
James Gilmore: The federal government taxes most of the money from the working people in the states, and the nation overall. Just look at the withholdings from your pay stub. If major requirements are thrown on to the states, the Congress must provide the financing to carry out those programs.
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Arlington, Va.:
Virginia's state and local tax burden on its citizens is lower than 39 states and the District (taxfoundation.org). Mr. Gilmore, you and many other Republicans complain that taxes in Virginia are too high. Compared to what?
James Gilmore: To answer this question would require a careful evaluation of how tax burden is calculated in all the states that you cite. Our duty is to keep taxes low on the working people of the state of Virginia while performing the proper functions of government. If the question implies that a higher tax rate is a good thing, I would reject that. If we truly are paying less, then we have delivered a benefit to our public. But, I would remind you that the real burden on the people are the federal taxes which are consistent across all the states in terms of burden.
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Arlington, Va.:
Thank you for standing up against tax hikes. What lessons did you learn during your successful "NO CAR TAX" Gubernatorial campaign?
James Gilmore: I learned that when you make a promise to the people that you should keep it if you can possibly find a way to do it. This restates my main point: If you are trying to keep your word, you will find a way to responsibly do it. If you never intended to keep your word, then you can govern in such a way as to make tax increases seem urgent and inevitable. This is why I believe we should return to a standard in political campaigning that says that you mean what you say and the public has a right to expect you to work your heart out to try to keep your word.
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Annandale, Va.:
Mr. Gilmore -- It's abundantly clear to me that taxes in Virginia are very much out of line with basic state needs. There's no fat left to trim from the budgets, we are down to the bone -- witness the abysmal snow removal performance of VDOT this winter due to lack of funds. People died this winter because VDOT lacked the funds to keep road safe. How far down the road to anarchy are you willing to go in your anti-tax mania?
James Gilmore: Thanks for your gentle question. Virginia enjoyed enormous revenue growth during my administration. In 1997, the Virginia general fund budget was about $7 billion. Over those four years, revenue in the general fund grew to about $11 billion. Typically, the Legislature will spend every dime, even though there are often disagreements between the Governor and the Legislature as to how the money should be spent. There are only two ways presently existing to prevent government from spending everything: the rainy day fund (which is only deferred spending), and the car tax cut. We need a way to hold some additional funds away from spending. I have proposed that a law be established to allow the Governor to set aside a certain amount of surplus and to only allow that money to be spend by the Legislature on a supermajority vote. We are in need of reform in Virginia, but Govenor Warner's plan is, disappointingly, not reform. It is only a tax increase.
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Midlothian, Va.:
Usually there's a time limit on blaming predecessors, but the Warner Administration and the pro-tax forces are still blaming you and Governor Allen for the "mess" we are in. How do you respond?
James Gilmore: We left no "mess". We left a balanced budget taking the most conservative estimate of future revenues offered by any national advisory organization, state finance professionals, economic advisers, or business advisers. The recession did prove to be more severe than anyone anticipated. Since revenues had grown by double digit percentages during our administration, a sudden drop did create a challenge which any Governor would have to meet. Governor Warner is responsible for the decisions and choices that he is making to deal with the recession. It is not appropriate for him to imply that he is actually making bad decisions but someone else is to blame. There has been a pattern of blaming others for his approach to government.
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Skinquarter, Va.:
Do you have any second thoughts about the car tax repeal? Would you do it differently today? I always thought eliminating the car tax was the ultimate populist issue--most Virginians need a car to earn a living and should not be taxed annually on that necessity. If car tax relief costs have exploded, it's because more cars, and more expensive cars, are covered. I would only have given each taxpayer over 18 relief on one car, capped at a valuation of $15,000.
James Gilmore: Car tax relief has not exploded nor is it "escalating" as is often said in the press. Car tax relief, through a 70% reduction through 2006, takes about 20% of the new dollars in the general fund. At least we have been able to afford that much tax relief. Everyday, working men and women of the state express their appreciation for this tax cut. Two weeks ago, a waitress told me what difficult times she was having and how thankful that she didn't have a big car tax burden to deal with. Last week, a cab driver thanked me for the car tax cut. This is the right program for the people of the state.
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Arlington, Va.:
I agree with you 100% that the current Governor lied to us about raising taxes, but that's a well used tactic of the Democratic Party, so it should come as a surprise to no one. Virginians shouldn't be looking for ways to increase spending and taxes. On the contrary, we should be slashing the current budget by several billion dollars and lowering the income tax rate for all Virginians. The way is there, if the Republican members of House and Senate don't cave in to political pressure. The state should also cap the ability of counties to increase revenues automatically through housing appreciation. It's a automatic tax hike, without county supervisors having to lift a finger.
James Gilmore: Thanks for your statement.
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Arlington, Va.:
I don't know much about what my tax money pays for. But I do know that it's becoming totally unaffordable to live in this area. Metro fares are going up and my car tax is outrageous. So I'm starting to run out of ways to get to the places I need to get to. The roads are terrible; my car was hit two weeks ago by another car that got thrown sideways out of a pothole. The sidewalks are never shoveled after snowfalls. I saw two elderly people struggling to get to a bus stop that was surrounded by piles, 2-3 feet high - of old snow. Please, please don't raise my taxes without fixing these problems. I'm trying to move out of the area because it's getting too hard and to expensive to move around.
James Gilmore: Actually, I always stood up for VDOT when they were being made a political football in the last election. During my administration I secured the money for the new Wilson Bridge, and we managed our way through the construction of the new mixing bowl project. I also established a priority transportation fund to accelerate needed projects.
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Tampa, Fl.:
As I used to live in Virginia, I still follow the news up there. So I was wondering about relying on user fees to bolster revenues for Richmond. In particular, why not charge for zone parking permits? Zone parking essentially restricts public property (the streets) for private use (only those living there get a permit). Yet all taxpayers pay for these roads, even though they are denied an important use of them. Such fees might start at $50/month for basic restricted parking (9 to 5 weekdays, with a 3 hour exception), then escalate as the pubic suffers more restrictions. E.g., add $25/month for extending restricted parking beyond weekday working hours, and add another $25/month for reducing the 3-hour exception. Thus, permits for 24/7 restricted parking with no exceptions would cost $100/month. Cities and counties could use these funds to build parking garages for commuters.
Only a very few benefit from restricted parking, so let them pay for the special privileges they receive for for which the public pays.
James Gilmore: Working in DC, I am very sensitive to any program which would give more opportunities for arbitrary parking tickets. But, thanks for your suggestion.
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Springfield, Va.:
While much of the talk in support of the tax increase justifies them as an attempt to keep the quality of life we enjoy, do you think that the additional taxes on incomes over $100,000 will increase the Northern VA. appeal to businesses and (2) will the loss of tax deductions for people over 60 and 65 not push more retirees to North Carolina and Pennsylvania which do treat retired government employees much better?
James Gilmore:
Let me only point out that two working people easily exceed $100,000 for a household. Also, a sales tax increase as proposed is a 22 percent tax increase on everyone in Virginia and falls particularly hard on working people with families.
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