Who wins and who loses from Virginia tax cuts?
GOP gubernatorial candidate Glenn Youngkin has made large tax cuts a central part of his campaign. In fact, he first suggested that his ultimate goal was to completely eliminate the state income tax – a tax that funds two third of all Virginia government services! Perhaps because that would have bankrupted the state government, however, Youngkin recently changed his mind. He now advocates a package of tax cuts that would reduce state revenues by “only” $1.8 billion. That certainly sounds reasonable, doesn’t it? And who doesn't like a tax cut?
But should we? In particular, if you live in a rural county, think first about how life will be with smaller, weaker schools, less access to community college education, less money for transportation infrastructure, police etc after the government cuts its budget.
Because the reality is fewer taxes mean fewer services. Services that rural areas need more than urban ones.
That’s right. We all know that the last two decades have been hard on rural counties. America’s transformation into a knowledge economy has left rural counties falling further and further behind. Which is why the results of the new census show almost all of Virginia’s rural counties are losing population.
So how can rural areas catch up with their prosperous urban neighbors? Only by getting more access to education, health care, and critical infrastructure such as broadband, roads etc – the infrastructure that rural areas need to outcompete urban areas for jobs and businesses.
Unfortunately, a cash-strapped Virginia state government has struggled for years to provide the help that rural areas need. Take higher education, for example. Rural Virginia’s future depends on good education and Virginia’s colleges are great. Unfortunately, years of budget cuts by Republican legislators have made them so expensive that lower-income students can’t afford them. In fact, college tuition at Virginia state schools is nearly double what North Carolinians pay. Fortunately, this last year, a newly Democratic-run Virginia assembly got us back on track, even making the bold proposal to make community college free for lower income students. Rural students will benefit disproportionately. But will these ideas survive a round of Youngkin tax cuts?
Remember too where we were only a couple years ago on rural healthcare. Rural areas desperately needed Medicaid, not just for low-income residents but to help keep rural hospitals and doctors afloat. Republican legislators refused for years, however, preferring more low taxes rather than rural healthcare. Today, thankfully, that is changed. Access to healthcare is now available for tens of thousands of Virginia residents because, under Democratic pressure, state legislators approved Medicaid expansion. But healthcare costs money. Will it survive another round of tax cuts?
Youngkin argues that he just wants to return the state’s temporary budget surplus to the voters. However, the truth is that Virginia is hardly a high tax state. In fact, our total tax burden is already in the bottom third of the 50 states.* So Virginia agencies are hardly swimming in cash. They need more investment, not another round of budget cuts.
So, the answer to the question “who wins – and who loses” from tax cuts is really pretty easy. Tax cuts will put more money in the pockets of the already well-off -- individuals, municipalities, and counties – those who pay more to Richmond in taxes than they receive in services. Take Loudoun County, for example. Its residents send nearly $1 billion in taxes to the state treasury each year but receive back far less in services.** So even if tax cuts lead to state service cuts there, Loudoun could fund those services itself. And its residents would still have money left over.
And the losers? Rural counties pay less in taxes to Richmond (so will get less money back via a tax cut), but depend enormously on state support for schools, higher education, health care, roads, police, and so on. Tax cuts could easily force rural counties to either cut back on schools and other services, or raise property and sales taxes to make up the difference. Or both.
So do tax cuts still seem like a good idea?
References:
*see https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494
**see https://loudounnow.com/2019/11/07/the-buck-starts-here-loudoun-and-virginias-tax-imbalance/