Virginia’s would-be governors vow to change state’s taxes

RICHMOND, Va. (AP) — What would a political campaign be without promises of tax cuts and reforms?
Virginia’s closely watched race for governor is no exception, with all three candidates promising changes to the state’s tax code.
Republican Ed Gillespie is promising an across-the-board cut on income taxes, Democrat Ralph Northam vows to cut on grocery sales taxes for the poor, and Libertarian Cliff Hyra wants to ban some local business taxes.
But voter beware: Promising tax cuts is a lot easier than enacting them once elected. Competing special interests and political concerns have hampered past efforts, and past governors have not always kept their campaign promises on taxes once in office.
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THE ISSUE
Virginia’s tax burden generally compares favorably to the rest of the country, but there’s been widespread agreement among state leaders that parts of the tax code are outdated and some kind of overhaul is needed. Some taxpayers complain that certain business taxes hamper economic growth. Others say tax exemptions overwhelmingly benefit the wealthy.
Virginia’s budget is heavily dependent on state income taxes, and has faced deficits in recent years when revenue projections fell short. Complicating matters is the state’s continued heavy reliance on federal spending. Defense spending cuts have been particularly harmful in a state that’s home to the Pentagon and the country’s largest naval base.
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CANDIDATES’ VIEWS
Gillespie has made cutting the state income tax rates by 10 percent a key campaign plank, saying it’s needed to boost a stagnant economy. Virginia taxes income over $17,000 at a rate of 5.75 percent, which under Gillespie’s plan would be reduced to 5.15 percent.
Gillespie also would push local governments to get rid of certain local business taxes that help fund local governments. The business community has complained about problems with these taxes for years, but no easy replacements have been found for the revenues they generate. Gillespie said he would work with “all stakeholders” to find a replacement, but ruled out a local income tax.
In addition, Gillespie said he would get rid of special tax preferences for “entrenched special interests.” He did not offer specifics, but said he would work with lawmakers and convene a special session in 2018 on tax reform.
Northam has made a similar pledge, saying he would task a bi-partisan commission to come up with “comprehensive tax reform” that is “simpler” and “fairer” than the current system. He’s also proposed phasing out sales taxes on groceries for the poor and suspending local business taxes for new businesses in rural areas.
Hyra wants to cut income taxes and ban certain local business taxes. He wants to exempt income taxes from the first $30,000 income of individuals and $60,000 in income for households.
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VOTERS BEWARE
Regardless of who wins, there’s no guarantee Virginians’ taxes will change. Gillespie’s plan to cut income tax rates, which he said would be paid for by projected revenue growth and not lead to cuts in services, has been met with skepticism both by Democrats and some Republicans concerned about meeting the state’s spending needs while preserving its AAA bond rating.
The left-leaning Commonwealth Institute for Fiscal Analysis said Northam’s grocery sales tax cut for the poor would be difficult to implement and blow a large hole in the budget.
Republican state Sen. Emmett Hanger, who chairs the Senate Finance Committee and has endorsed Gillespie but not his tax plan, said tax reform is a complex issue where well-funded special interest groups can have large sway.
“It’s difficult because of the politics involved,” he said.
And campaign promises don’t always come true. Republican Bob McDonnell ran for office in 2009 pledging not to raise taxes and criticizing his opponent for wanting to do so. Once elected, McDonnell helped push through a transportation-funding package that included significant tax increases.