Skip to comments.Bob McDonnell Risks Tarnishing His Legacy (The Virginia Tax Fiasco)
Posted on 02/25/2013 6:48:46 AM PST by SeekAndFind
Some Republican governors all of them elected with strong tea-party support have moved left since the November election by agreeing to participate in Obamacares expansion of Medicaid. The lure of free money from Washington has proven too much for governors Jan Brewer of Arizona, Rick Scott of Florida, and John Kasich of Ohio to resist. Obamacare promises to pay 100 percent of the cost of new Medicaid patients, lowering that to 90 percent in later years. Never mind that Uncle Sugar has a notorious reputation for reneging on promises and that history shows that expanding Medicaid only increases insurance premiums, because absurdly low Medicaid payments force hospitals to cost-shift and raise rates on the privately insured.
One GOP governor who has held firm against Medicaid expansion is Virginias Bob McDonnell. Less than an hour after Governor Scotts cave-in was announced on Wednesday, McDonnell tweeted to make clear he opposed any expansion absent sweeping structural reform of Medicaid. Reform is far more than simply receiving a waiver from the federal government, he wrote state legislators after the state senate passed a budget that enables the Medicaid expansion to move forward. Sadly, last month, 16 of the 20 Republicans in the Virginia state senate voted for the budget.
The legislators may be capitulating on Medicaid in order to marshal their resources for the real budget fight, which is over a massive state tax increase to pay for expanding transportation budgets.
McDonnell, who is limited by state law to one term in office, wants to build a legacy in his remaining year as governor. In that light, he last month proposed a $2.4 billion tax increase over five years that would end the states 17.5-cents-per-gallon gas tax and replace it with a sales-tax increase and a tax on gasoline at the wholesale level.
Virginia does have some of the nations most congested highways, and its gas tax which isnt indexed for inflation hasnt been raised since 1986. Because of increased fuel efficiency and the growth of hybrid and alternative-fuel vehicles, the gas tax has become a stagnant revenue source, McDonnell says. His solution is to shift much of the costs of transportation infrastructure from drivers to shoppers.
Spenders from both parties, however, exploit any proposed tax increase as an opportunity to grow government. McDonnells original proposal has become a garish Christmas tree of legislative add-ons. The tax increase has grown by 250 percent, becoming a $6.1 billion behemoth. The gas tax wont really go away, but will be replaced with a 3.5 percent wholesale tax. If Congress doesnt approve a law allowing states to collect sales tax from out-of-state Internet retailers, the tax will rise to 5.1 percent in 2015. If the price of gasoline doesnt rise a penny, the new tax will bring in the same amount of revenue. Meanwhile, sales taxes will jump to 5.3 percent, up from 5 percent, and new regional taxing authorities in Hampton Roads and Northern Virginia could see sales taxes in those regions increase to 6 percent. A host of other tax hikes have been grafted onto the bill. The tax on motor-vehicle sales will go up by a third, a new tax on home sales will be imposed, and there will be a $100 annual fee for drivers of alternative-fuel cars.
Its a feeding frenzy, with every legislator sticking on their pet tax before the bill leaves the legislature, says Jim Parmalee of Republicans United for Tax Relief. Legislators who opposed the tax hikes werent allowed on the conference committee that is designing the final bill.
So far Governor McDonnell has given no sign that he is willing to veto the bill, despite its kudzu-like growth beyond his original plan. Attorney General Ken Cuccinelli, the almost-certain GOP nominee for governor to succeed McDonnell, has finally come out in firm opposition. He says, In these tough economic times, I do not believe Virginias middle class can afford massive tax increases, and I cannot support legislation that would ask the taxpayers to shoulder an even heavier burden.
Grover Norquist, the president of Americans for Tax Reform, says the Virginia tax binge is even more disappointing in light of what other states are doing. North Carolina, Louisiana, Kansas, and Nebraska are trying to eliminate their state income taxes, he notes. Ohio, Oklahoma, Indiana, and Wisconsin are cutting their income taxes. Florida and Texas are cutting their sales taxes because they have no income tax. All of these states have roads, and elected officials that stand with taxpayers rather than against them.
Indeed, there are many creative ways that Virginia could restructure its budget to ensure there is enough money for transportation. The state has run a $1.2 billion surplus over the last three years, but the surplus was not returned to taxpayers; it went into a rainy-day fund. The legislature saw fit to spend less than 7 percent of that rainy-day fund on transportation. Gabriel Roth, who worked on transportation economics for 20 years at the World Bank, told National Journal that the governors plan places highway financing in the hands of Virginias politicians, whose recent experience in financing transport infrastructure has been unfortunate. If you cant prioritize roads when you have unexpected revenue surpluses because the economy grew faster than you were planning, when can you prioritize roads? Previous tax increases in Virginia were sold on the premise that they would be dedicated to either roads or education, but lawmakers did not follow through on those promises.
What Virginia needs is a sweeping tax reform, one that recognizes that the state has a 21st-century economy burdened by an archaic corporate- and personal-tax system that badly needs streamlining. As part of that, the state could create a dedicated road fund that would be paid for by the people who use the roads. Adding tax increases to the existing system will only slow down the economy and reduce the chance that the money will go where its most needed.
The danger now is that Democrats in the state legislature have been so emboldened by the expansion of the tax increase in the budget that some of them are now demanding that Governor McDonnell agree to the Medicaid expansion as the price for ensuring the Democratic votes necessary to pass the budget. Whatever McDonnell does, he shouldnt compound the tax fiasco he is overseeing with a cave-in on Medicaid that would eventually leave the state budget in worse shape than he found it in four years ago.
John Fund is a national-affairs columnist for NRO.
Bob McDonald is a good friend of Bill Bowling. What do you expect?
“Republicans moving left”, nothing new, Richard Nixon and George Romney, and even George Herbert Walker Bush were doing this in the 1960s.
VA Ping List material.
Bullshit! You have no idea what you're talking about. Bob McDonnell is and always has been a solid conservative. Hios relationship...if any exists, with Bill Bolling has nothing to do with his conservative principles or the Commonwealth's myriad and deadly serious transportation issues.
Bill Bowling does the dirty work. Stop fooling yourself.
McDonnell wants to run for US Senator. He had better think about what happens when Republicans abandon their principles and the base and the moderates and libs vote for the real Democrats. The GOP also seems to be trying to give back the Virginia House to the Democrats by this vote. Some of the House reps who votes for this mishmash of tax increases will lose their seats because of it IMO.
How in the world are we supposed to pay for transportation otherwise? The demand of transportation funds is HUGE in Virginia. I don’t like tax increases either yet I also know funding is required. It doesn’t magically appear out of thin air. I don’t know how those opposed to this funding plan expect the needs to be met. I’m sure they studied a variety of plans and this was the one they believe is the best.
“Bob McDonnell is and always has been a solid conservative.”
He’s an ineffective conservative, and he blew an opportunity to make an impact - by not pushing his ABC privatization. If he would have even partially succeeded in privatizing state functions (and ABC was obvious) and then went on to a couple more - he’d have established the foundation as a national player (because we’re going to have to do that federally)
He’s another bland status-quo GOP-er, with nothing to offer other than more of the same.
“transportation” is another place that could benefit from privatization in Virginia.
Rather funny because liberals and Democrats are condemning McDonnell’s tax plan.
” I dont know how those opposed to this funding plan expect the needs to be met.”
Balance the budget, fire enough government employees to accomplish it, cut cut cut.
Transportation problem solved in Virginia.
What was your idea? More taxes? Please. You can move to Maryland anytime if you want that.
No, more taxes isn’t my idea. It’s theirs. I’m simply asking the question. I’d love for them to cut and save the tax increase. I’m assuming they’ve decided there isn’t enough to cut and still meet the transportation demand.
Virginia Ping! If you want on or off the Virginia Ping List, please freepmail me.
“Im assuming theyve decided there isnt enough to cut and still meet the transportation demand.”
Well, I usually assume they fudge everything to point to an “obvious” raise taxes solution.
You always have to question the “need” that is used for the basic assumption.
The point is that McDonnell is a plain vanilla political opportunist - and he’s not even that good at it. He thinks he can compromise his way to a national platform. It’s not going to happen.
Pubbies for the most part are the most spineless, gutless, poor excuses for humanity. Bottom line, don’t turn your back on them.
Bob is now in the RINO column...no moola or support from me in the future.
This was all about Bob’s legacy. He was bound and determined to have a transportation deal regardless of how bad it was.
He betrayed his conservative principles and promises and pushed tax increases in a recession. He has accepted MASSIVE increase in medicaid - which will bankrupt us.
He IS implementing obamacare exchanges.
When he could have stood on principle, he caved like cooked spaghetti.
Well that bill isn’t going to do it.
A very small percentage of the total tax increase is actually going to roads.
No more whining NOVA. You wanted this crap sandwich. Savor every last morsel.