SEQUESTER: Obama's "Ugly" Baby
As sequestration kicks in, ATR President Grover Norquist has an op-ed up at American Spectator discussing the only good idea President Obama has shared with Americans. He points out that the President, unfortunately, has spent a quite a bit of time denying “paternity” to it.
As Bob Woodward points out on page 326 of The Price of Politics, the sequester was the brainchild of the Obama White House in the days leading up to the final debt limit deal in August 2011. And despite “tough love” from the Chicago boys, Woodward is sticking with the facts.
Obama’s pride in the sequester was based on the fact he thought it was a way to avoid real spending cuts. Grover points out that the thinking went as follows:
Republicans in 2011 demanded $2.5 trillion in real spending reduction in return for giving the President a $2.5 trillion increase in his debt limit. For months the president whined and stamped his feet, demanding that the $2.5 trillion be made up of equal parts: real tax hikes now and phantom spending restraint someday. He had two reasons to think this stratagem would work. First, it worked in 1982 against Reagan. And second, it worked 8 years later in 1990 against George H.W. Bush. In 1982 and 1990 the tax hikes were real and spending went up rather than down—even from projected levels.
Grover points out that McConnell and Boehner weren’t dumb enough to fall for this trick, insisting on spending cuts alone.
The August deal was roughly a $1 trillion set of cuts in domestic discretionary spending and the establishment of a “super committee” that was charged to come up with the rest of the $2.5 trillion in borrowing authority the president was granted in the law. If the super committee couldn’t find the additional savings, the law guaranteed a sequester would take place in 2013 to make up the difference. The Democrats on the super committee wanted $1.6 trillion in higher taxes plus $400 billion in more “stimulus” spending. This was, not surprisingly, a no-go and the sequester was the backup already in law.
Obama mistakenly thought that the sequester, which equally cut from Pentagon expenses and non-defense spending, would force Republicans to vote for a tax hike to make sure they didn’t actually have to cut spending. He didn’t anticipate that the GOP would share a common belief with the American people that the government can afford to grow slower than the President planned.
So now Obama is reduced to the equivalent of denouncing his own baby as too ugly to present in public.
House and Senate Republicans have made it clear that they are open to alternative ways to save the same amount of money—$1.2 trillion over the decade. But there will be no tax hike and no loosening of the spending spigot.
List of Virginia's 2013 Transportation Tax Hikes
Virginia’s 2013 state legislative session will be remembered for a lot of reasons. It was the year Republicans redistricted state senate districts to win more seats and then said just kidding, the year Republicans agreed to expand Medicaid in exchange for higher taxes (confused? Me too.), and most significantly, it was the year a Republican Governor worked with Democrats to raise taxes on Virginia families by $1.23 billion per year. Congratulations, Virginia.
In honor of a precedent set forth by Nancy Pelosi in Washington, the state legislature decided that they had to pass the 2013 Transportation Tax Hike (HB 2313) before they actually read it. Now that it sits on the Governor’s desk, we know what’s in the bill: a litany of higher taxes.
ATR’s State Affairs Manager Will Upton spent the weekend reviewing the bill and here are the results:
58.1-603: The State Sales Tax Hike: Bumps up the state rate from 4% to 4.3%. Localities already get a 1% sales tax on top so what consumers will see is a jump from 5% to 5.3%.
58.1-603.1: The Regional Sales Tax Hike: Additional sales tax in certain counties and cities. This section bumps the sales tax for Northern Virginia and Hampton Roads from 5.3% to an even 6%. In Hampton Roads, that means $200 million in higher taxes annually and $350 million in Northern Virginia.
58.1-638.3 Explanation of Where .3% Sales Tax Hike Goes: 40% to light rail and mass transit projects.
58.1-802.2: Northern Virginia Regional Property Tax Hike: Imposes a .25% tax on the sale of property in Northern Virginia
58.1-1742 Northern Virginia Hotel Tax: 3% hotel tax increase for Northern Virginia
58.1-2217 Replaces Gas Tax With Sales Tax on Gas: Moves the gas tax from a 17.5-cent tax per gallon to a 3.5% of the statewide average wholesale price of a gallon of self-serve unleaded regular gasoline for the applicable base period. Also replaces diesel fuel tax of 17.5-cents per gallon to a rate of 6% on the statewide average wholesale price of a gallon of self-serve diesel fuel, about a 5 cents per gallon tax hike.
Both the diesel and unleaded gas taxes have built in floors laid out in the bill to prevent the state from losing revenue.
58.1-2249 Alternative Fuel Vehicle Tax: $100 registration tax on alternative fuel vehicles, an aptly rounded $66.6 million tax hike over 5 years.
58.1-2295: Hampton Roads Retail Dealer Tax: keeps in place the 2.1% tax on sale price charged by a distributer to fuels sold to a retail dealer in Hampton Roads.
58.1-2402: The Car Tax: increases the vehicle sales tax from 3% to 4% in 2013, 4.1% in 2014, 4.2% in 2015, and 4.3% in 2016.
58.1-2217. The We’ll Get You if Congress Doesn’t Tax: If Congress rejects the federal internet tax scheme, the tax on wholesale gasoline in 2015 will increase from 3.5% to 5.1%, without a provision to revert back if the law were to pass after 2015.This is a $1.2 billion tax hike over 5 years, according to the Governor’s estimates.
Taxpayers were stabbed in the back. Republican Bob McDonnell still has the chance to veto this monstrosity, though that is unlikely given that he has been a vocal cheerleader for HB 2313 for more than a month, even when the bill went from a $2.4 billion tax hike to a $6.1 billion tax hike.
Bob McDonnell campaigned against Democrat Creigh Deeds in 2009 saying that he unequivocally would “not raise taxes.” The lesson here? When a politician refuses to put in writing that he or she will oppose tax hikes, there is probably a reason. Thanks, Bob.
Virginia House GOP Stabs Taxpayers in the Back -- Follows the Lead of Tax and Spend Democrats
Today, the Virginia House of Delegates passed a $6.1 billion tax increase, when fully implemented over 5 years. The transportation plan, initially designed as a $2.4 billion tax increase exploded in size once negotiations began between the Senate and House earlier this week. Virginia taxpayers were never afforded the opportunity to read the legislation that included the following tax hikes:
- Diesel tax hike from 17.5 cents per gallon to 6 percent tax on wholesale diesel, roughly a 5 cent per gallon increase
- Sales tax hike from 5 to 5.3 percent
- Additional sales tax hike of .7 percent in Hampton Roads and Northern Virginia
- 3 percent Northern Virginia hotel tax
- Car tax hike from 3 percent to 4 percent in 2013, 4.1 percent in 2014, 4.2 percent in 2015, and 4.3 percent in 2016
- If Congress rejects the federal internet tax scheme, the tax on wholesale gasoline in 2015 will increase from 3.5 percent to 5.1 percent, without a provision to revert back if the law were to pass after 2015
Only three Taxpayer Protection Pledge signers broke their Pledge to their constituents to oppose any and all efforts to increase taxes. They were Del. Dave Albo, Del. Kirk Cox, and Del. Randy Minchew.
“This was not a compromise. It was a surrender of principle and policy. There were no spending cuts or tough choices. This was Bob McDonnell and some Republican Delegates and Senators, in league with almost all Democrats, betraying Virginia taxpayers . McDonnell took the lead on a $2.4 billion tax increase and oversaw its transformation into a $6 billion tax increase. When Virginians look at their thinner, lighter wallets, they have a handful of lawmakers to blame: Speaker Bill Howell, Sen. Frank Wagner, Sen. John Watkins, Del. Chris Jones, and now, Governor Bob McDonnell,” said Grover Norquist, President of Americans for Tax Reform.
“In 2009, Bob McDonnell said he would not raise taxes. Now he says he will sign a very large tax hike. Perhaps that is why he refused to put that promise in writing by signing the Taxpayer Protection Pledge to oppose higher taxes on Virginia citizens. Politicians who refuse to sign the pledge will eventually, when asked, raise taxes.”
[Unlike Prior to the Bill's Passage, You Can Now Read the Bill Here]
Where Do Virginia Republicans Stand: With Ken Cuccinelli or Terry McAuliffe?
Virginia’s Republican and Democrat gubernatorial candidates, Ken Cuccinelli and Terry McAuliffe, have taken two completely different positions on a transportation package before the General Assembly. One stands with taxpayers and one stands with higher taxes.
Republican Ken Cuccinelli: “In these tough economic times, I do not believe Virginia’s middle class can afford massive tax increases, and I cannot support legislation that would ask the taxpayers to shoulder an even heavier burden than they are already carrying."
Democrat Terry McAuliffe: “Virginia simply cannot afford to miss this opportunity to make substantial progress on transportation.”
New regional taxing authorities, a higher sales tax, a higher car tax, an internet tax scheme, and a higher diesel fuel tax all result in what could amount to a $6.1 billion tax hike over 5 years, once fully implemented.
With the General Assembly scheduled to vote as early as this afternoon, the Republican Party should think about where they stand: with Democrat gubernatorial candidate Terry McAuliffe or Republican nominee Ken Cuccinelli.
“I applaud Ken Cuccinelli for opposing what he rightly describes as a ‘massive tax increase.’ Given the high cost of gasoline, slew of new Obamacare taxes, and the overall increased burden of a growing federal government, this is a horrible ‘opportunity’ for higher taxes,” said Grover Norquist, President of Americans for Tax Reform.
“Virginia legislators preparing to vote on the amended transportation plan should ask themselves where they stand. Do they stand with Terry McAuliffe, the Democrat nominee for Governor or with Attorney General and Republican gubernatorial candidate Ken Cuccinelli? Legislators should stand up for taxpayers instead of against them.”
Norquist: The Transportation "Deal" Is One of the Largest Tax Hikes in Virginia History
Today, President of Americans for Tax Reform Grover Norquist released the following statement regarding ongoing negotiations between Virginia House and Senate conferees on a transportation plan:
“Governor Bob McDonnell’s proposed transportation fix started as a $2.4 billion tax increase. As the House and Senate conferees debate the final language, the size of the tax hike has evidently increased by 250 percent, to nearly $6.1 billion in new and higher taxes once fully implemented over five years.”
“New regional taxing authorities imposed in this ‘agreement’ in Hampton Roads and Northern Virginia could raise taxes by as much as 550 million dollars per year in these two regions. A higher sales tax, higher car tax, an internet tax scheme, and a higher diesel fuel tax are not indicative of bold leadership in any sense of the term.”
“This is a massive tax increase almost as large as the Warner tax hike of a few years ago. Luckily these tax hikes can be avoided as roads and airports connect Virginia taxpayers with other states with Republican governors and legislatures that are actually cutting taxes. North Carolina, Louisiana, Kansas and Nebraska are all calling to eliminate their state income taxes. Ohio, Oklahoma, Indiana, and Wisconsin are cutting their income taxes. Texas and Florida, who cannot cut their income taxes because they don’t have any, are preparing to cut their sales taxes. All of these states have roads….and elected officials that stand with taxpayers rather than against them.”
“Yet again, what could have been a sound, tax-neutral, pro-growth transportation funding proposal has been hijacked by a number of Republicans who join Democrats in believing that all transportation costs must be paid for by higher taxes. This should not come as any surprise to those familiar with Senator Frank Wagner, Senator John Watkins or Delegate Chris Jones’s history in the legislature. They are not allies with Virginia taxpayers.”
ATR Supports Thomas Jefferson Institute's Friendly Amendment to Gov. McDonnell's Transportation Plan
Americans for Tax Reform applauds the Thomas Jefferson Institute for Public Policy’s friendly amendment to the Governor’s transportation plan, which addresses maintenance funding for Virginia’s transportation system. Although the plan has yet to be put into legislative form, as it has been outlined to Americans for Tax Reform, the plan appears revenue neutral and makes changes to the Virginia tax code that are pro-growth and pro-taxpayer. In short, the Thomas Jefferson Institute’s proposal is what a plan for serious tax reform in Virginia should look like.
The Thomas Jefferson Institute developed their plan by taking into consideration the economic consequences of tax policy in the areas of job creation, investment in the economy, and changes in disposable income and projected those consequences over a 5 year period.
The plan would raise the gas tax at the rate of inflation (using an inflation rate of 2.5-percent per year) after an initial increase from 17.5 cents to 20 whole cents. The Thomas Jefferson Institute notes that in five years, the Virginia state gas tax will only have risen to 23.19 cents per gallon.
In exchange for indexing the gas tax to inflation, the plan provides an offset by indexing the current state income tax brackets to inflation as well. The income ceiling or the tax brackets would increase by the same inflation factor as the gas tax (2.5-perent per year). The brackets would be adjusted so as to keep the balance between the income tax and gas tax “revenue neutral:
Current Bracket Inflation Adjusted Bracket
$ 0- $3,000 $0 - $ 6,056
$ 3,001 - $5,000 $ 6,056 - $10,093
$ 5,001 - $17,000 $ 10,094 - $34,315
$ 17,001 and up $ 34,316 and up
They note: “Under the Jefferson Institute’s transportation funding plan, in year five there would be $284.5 million dollars more generated by the gas tax and $284.5 million less paid by income taxes. This clearly is a revenue neutral plan.”
This plan appears to be revenue neutral and a step in the right direction for real tax reform in Virginia. The plan, as described, raises money for roads without raising taxes.
Norquist: Defeat of SB 1355 Transportation Bill is a Victory for Virginia Taxpayers
President of Americans for Tax Reform Grover Norquist today released the following statement after the Virginia state senate recommitted the Governor’s “Road to the Future” transportation plan back to committee:
“The defeat of SB 1355 demonstrates that the state senate understands that the Governor’s transportation proposal was not the best solution to Virginia’s transportation needs. Although the Senate will vote on the House version of the bill in the coming weeks, what is clear is that the legislature remains divided on whether a massive tax hike is the best solution to paying for new transportation costs.”
“HB 2313 remains as an unacceptable solution to Virginia’s transportation crisis. It contains a $607 million sales tax hike, more than $500 million in car taxes, and an internet tax scheme. In the last three years, Virginia has run a surplus of $1.4 billion. Less than $21 million of that went to transportation, a miniscule 1.5%. Now is the time to prioritize currently collected and new growth revenue to transportation, not to raise taxes.”
State Senator Frank Wagner: Flip Flopped on the Travel Agency Tax
Americans for Tax Reform has sent more than 11,000 pieces of direct mail into State Senator Frank Wagner’s district asking constituents to call Senator Wagner demanding answers. Despite the fact that in 2011, Wagner voted NO on Democrat Senator Mary Margaret Whipple’s online travel agency tax, this session he was the chief sponsor of that same bill.
Virginia Beach receives more than $1 billion annually from domestic travelers, supporting nearly 12,000 travel-related jobs. Wagner’s targeted tax would increase the costs of using service providers who help travelers find the best deals on hotels, disproportionately harming small businesses and budget-conscious travelers.
A copy of the mail piece can be seen here.
“As a representative of Virginia Beach and Norfolk, Senator Frank Wagner should know better than to target the tourism industry for higher taxes. Wagner’s efforts to raise taxes have gotten out of control,” said Grover Norquist, president of Americans for Tax Reform. “Voters deserve to know why Wagner voted no on the travel agency tax when it was carried by a Northern Virginia Democrat and then decided to carry the bill during the 2013 session. Wagner is not representing the interests of budget-conscious Virginia tourists and should be held accountable for his most recent flip-flop.”