More fun and fraud with numbers
by James A. Bacon
Let me preface this article by stating unequivocally that eliminating personal income tax from Virginia is a crazy idea – so crazy that no serious person has come up with it. The tax generates $ 16 billion in revenue per year, or 72.4% of Virginia general fund spending. The loss of such a sum would be catastrophic for the ability of the Commonwealth to provide basic government services.
According to PolifactRepublican gubernatorial candidate Glenn Youngkin briefly considered eliminating state income tax. There is nothing inherently wrong with examining the possibility to do such a thing. After all, several states – Florida, Texas, Tennessee, Washington – manage to do without personal income tax. However, any examination of the situation would reveal that the upheavals in government services brought on by a massive overhaul of Virginia’s tax base and budget would not be feasible, let alone beneficial.
That said, some claims against the idea are absurd. A Virginia Democratic Party website, quoted in a recent column by Arthur G. Purves, claims that “the implementation of Youngkin’s tax plan” of eliminating income tax (which never been his plan) would cost 2.5 million jobs in Virginia. Out of a total workforce of 4.3 million. In other words, the elimination of a tax accounting for 3.3% of the state’s GDP would destroy the equivalent of 59% government jobs over 10 years.
The same DPV statement cited as a source a “media advisory” from the Virginia Education Association, which in turn cited a “new independent study” – independent in the sense that it was carried out by the National Education Association, and no by the Virginia Education Association. And it really wasn’t a study. The document, which Bacon’s rebellion obtained this morning, is presented as a “report” summarizing the results of running the zero income tax scenario through a REMI (Regional Economic Modeling, Inc.) analysis.
This same analysis comes to the less than intuitively obvious conclusion that the elimination of a tax that represents $ 16 billion of the state’s GDP. would have cause a loss of $ 182.5 billion in GDP over 10 years, or twelve times more.
The NEA report does not describe the inner workings of its model. But it doesn’t take a doctorate in economics to know that a $ 16 billion tax cut would offset the losses suffered by some degree by enabling businesses and consumers to spend, save and invest more. Would this economic bonus thwart the chaos caused by the collapse of the state government and the disruption of law enforcement, administration of justice, corrections, K-12 education, higher education, Medicaid, business regulation? The negatives would probably outweigh the positives, but you can’t say the positives don’t exist.
The report cites the Kansas experience in which Governor Brownback enacted perhaps the biggest income tax cuts in the history of any state in the hope that the cuts would “blow the whistle.” ‘adrenaline’ for the economy. Does not occur. Economic growth has slowed. But to say that economic growth slow motion is far from saying, as the NEA, VEA, and Virginia Democrats have suggested, that comparable tax cuts in Virginia would lead to an economic collapse destroying three out of five jobs.
Youngkin took the cautious approach – returning some of the Virginia taxpayer’s money to taxpayers, as Steve Haner commented in great detail. The tax cuts are small in the face of increased government revenues, but they are long-lasting and will not ruin the economy. Indeed, Youngkin’s proposal would provide the first relief Virginia taxpayers have received in years.
As for the exercise of running a scenario that no one has come up with… through an econometric model full of hypotheses never explained to the public… and grouping the results together in a “report”… and repackaging the report as a “ study ”… and falsely label results as“ independent ”… well, you can draw your own conclusions about the value of the resulting numbers. The phrase “hot spit bucket” comes to mind.