Sunday, March 27, 2011

The Importance of Tax Fairness in Virginia

Today's Washington Post has a terrific op-ed piece co-written by Virginia state representatives David Toscano (a Democrat) and R. Lee Ware (a Republican). In "Shining Some Sunlight on $200 Million In Virginia Tax Breaks," they note that "[w]ith every tax credit that is adopted, a policy decision is made about the appropriate use of public resources." The coal industry alone has an estimated $100 million in tax credits. Simply eliminating that tax preference could result in a reduction of the corporate tax rate from 6% to 5.25%, or provide a refund of $15 a year to every Virginia taxpayer. When legislators (this goes for Congress, too) talk about taxes being "too high," the answer is not always spending. A significant issue is the inequities in the tax code that favor one taxpayer over another. Why, for example, should a coal mine operator in effect pay lower taxes in Virginia than the mom and pop owners of the local Subway sandwich business? Is it only because the mine operators wield greater political clout? [Yes.] The authors suggest that, at a minimum, all such tax credits should come with an expiration date. There may, in fact, be a compelling policy (not political) reason for a tax credit, but the legislature should be forced to reconsider periodically the continued existence of that rationale. We'll just note that the problem is far greater at the federal level. Tax rates could be lowered significantly if all the preferences, credits and loopholes in the current tax code were eliminated or closed, without reducing spending on critical program.

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