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Wall Street Journal Opinion THE WESTERN FRONT BY BRENDAN MINITER It's hard to think of a better chance Republicans have had to connect cutting spending to helping the poor than what's been happening in Virginia. But now with the state's House of Delegates joining the Senate--the GOP controls both bodies--in endorsing a tax increase, it seems that that opportunity will be lost until at least the next recession. Surprisingly, this rare opening was made possible by Mark Warner, the state's Democratic governor. It began with the governor's plan to raise taxes by $1 billion a year. His tax "reform," the governor assured Virginians, would lessen the tax burden on the poor and transfer it to "the rich." To add a sense of urgency Gov. Warner said that if his plan was not adopted, the state's "essential" services would be cut along with money for higher education and transportation. And to allay fears, Mr. Warner released a county-by-county breakdown of how many people would actually pay his higher income taxes. Voters could also check the governor's Web site to see if their personal tax bills would increase. That's when any thinking Republican would've grabbed his wallet while looking for the plan's fine print. If they cared to, Republicans in the General Assembly could have taken issue with the governor's plans not only to raise income taxes on those who make more than $100,000 a year--a threshold that's likely to be lowered over time--but also to increase cigarette and sales taxes as well as eliminate some tax breaks for the elderly. There's perhaps no more sympathetic a taxpayer than someone who, after serving a long life in the workforce, is now living on a fixed income. Even if that income is generated from a relatively large nest egg, the state has long been content to afford them a little extra protection. Like other states, Virginia has specific tax breaks to ensure the elderly do not lose their homes or other assets because of an inability to pay the taxman. Yet, the Republicans didn't make the governor pay a political price for targeting grandma. Astonishingly this also holds true for the governor's plans to raise cigarette taxes (to 25 cents a pack, up from 2.5 cents) and sales taxes. Both are regressive taxes; they hit hardest those with the lowest incomes. Gov. Warner might try moralizing his cigarette tax as good for Virginians, but Republicans might have tried siding with the truck driver who will soon have to pay more for his smokes. Instead Republicans in the state Senate passed legislation that will raise taxes on gasoline, businesses, deeds, car titles and vehicle registrations. In total it's a $4 billion tax increase that must now be reconciled with the House version. Once again, Republicans didn't make Gov. Warner pay a political price for placing a heavier burden on the poor at the cash register, the gas pump or the Department of Motor Vehicles. House Republicans are somewhat better. They want to raise taxes only about $500 million. They arrived at this decision by locking onto a strategy of retaliation against the special interest that are normally core Republican supporters--large businesses. The Virginia Chamber of Commerce and other business leaders backed the governor's tax plan, so Republicans stripped out some tax breaks for larger businesses. It's not just state-level party leaders who are being foolish. Sen. John Warner, a Republican who isn't related to Gov. Warner, also backed higher taxes. Why? This year, we were told, tax "reform" offered an opportunity to balance the state's books and "invest" in the infrastructure that will make the next economic boom possible. But this is all looking like an old-fashioned tax increase, followed by a spending spree. As soon as the governor pitched his billion-dollar tax hike, legislators from both parties proposed billions in new spending. Even the governor's proposed $59 billion biennial budget includes $2.4 billion in new spending. A few Republicans who argued that the governor's plan would be a net loss for the state; they released estimates of the tens of billions of dollars that would be lost to the economy by chasing businesses out of state. Chasing businesses out of the state hits the working poor--who are employed by these businesses--the hardest. What Republicans missed is the chance to show that the state's fiscal responsibility has a direct impact on those least capable to adjusting to higher prices and fewer job opportunities. Some Republican legislators showed up in Richmond brimming with ideas on how to cut spending. Chief among them was Delegate Christopher Saxman, chairman of the House Cost-Cutting Caucus, who along with a handful of other lawmakers is pushing a series of bills collectively known as the Competitive Government Act. Mr. Saxman told me the state could save billions if only it took a hard look at the books. One thing the state needs is an inspector general, he said. It could also collect millions of dollars already owed to it by hiring a private collection agency to go after debts smaller than $15,000. And the state could subject its bureaucracy to the efficient forces of the market. School, prison and other construction projects could be further opened up to competitive bids. The state could also look seriously at privatizing enterprises such as state-run liquor stores, he said. But the lesson
in all this is that executive leadership--on the federal or state level--is
essential not only to control spending, but also to ensure that public
policy doesn't destroy economic opportunities. That's a lesson President
Bush, who has been good on taxes, needs to consider before he signs
another spending bill. Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved. |
