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Ken Cuccinelli and Terry McAuliffe must provide more specifics on how tax cuts would affect government services.
Thursday, May 9, 2013
After weeks of unflattering news stories about business deals and conflicts of interest, Virginia’s candidates for governor finally are talking about policy. Sort of.
Democrat Terry McAuliffe and Republican Ken Cuccinelli have advanced competing tax cut proposals that are long on lofty goals but short on the details voters should demand over the next six months.
Both candidates want to reduce or eliminate three locally imposed taxes that are loathed by businesses: the business professional and occupational licensing (BPOL) tax, the machinery and tools levy and the easily avoided merchants capital tax.
McAuliffe said he would create a task force to come up with “revenue neutral” proposals giving localities the option to reduce the business taxes and the authority to replace them with unspecified revenues. Cuccinelli’s campaign said details will come after a tax restructuring study that lawmakers requested.
After enduring state funding cuts in recent years and having more responsibilities pushed down to them from Richmond, localities have reason to be wary of plans to target local taxes and to press the candidates for specifics.
Cuccinelli also wants to reduce individual and corporate income taxes, which produce more than 70 percent of the revenue for the state’s general fund budget. He said Tuesday the $1.4 billion loss of revenue can be made up by eliminating tax preferences that promote “crony capitalism,” but offered no examples of specific breaks he would target. Tax credits for education and health would be protected, he said.
Given the General Assembly’s reluctance to eliminate ineffective tax preferences or sales tax exemptions enjoyed by the state’s most powerful industries, Cuccinelli’s plan looks like fantasy.
In 2004, the Republican-controlled House of Delegates pushed to repeal a dozen sales tax exemptions enjoyed by utility and telecommunications companies, airlines, railroads and research and development firms. Lobbyists mounted a full-scale assault to bury the proposal in the Senate Finance Committee, and it never again saw the light of day.
The Joint Legislative Audit and Review Commission conducted a thorough review of the effectiveness of state tax preferences in 2011. Among other things, it found that $31 million in coal industry tax credits had done nothing to stop the industry’s decline. Would Cuccinelli, who has gone to war with the Environmental Protection Agency over carbon regulations, really go after an ineffective credit that benefits the coal industry? It’s hard to imagine.
Cuccinelli’s campaign disputes assertions that the tax cut proposal would blow a hole in the state budget. But if the attorney general wants voters to take his plan seriously, he has to show them his math.
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