UPDATE, Friday, 4 p.m.: A subcommittee of the Virginia House Finance Committee, chaired by Del Tim Hugo (R) of Centreville, on Friday killed the bill which would have removed the requirement for a public referendum before Northern Virginia counties and cities could impose a one percent income tax.
ORIGINAL POST: Hey Northern Virginians! How would you like to pay another one percent of your income directly to your county or city, in addition to the federal and state income tax you already pay? This new income tax would be used strictly to remedy our wide and varied transportation problems. Sound good?
Before you answer, know that our friends in the Virginia state Senate have already passed this idea, and it’s now being pondered by the House. It happened late at night last week, on the last day such bills could emerge from one house or the other, and was misleadingly titled, “City of Portsmouth authorized to levy to generate revenue for transporation.” The title didn’t mention that it would also authorize the counties of Arlington, Fairfax, Loudoun and Prince William, and the cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park to do the same — the entire State of NoVa, plus Norfolk and Virginia Beach.
This income taxing authority actually already exists in Virginia law, with one important condition: It must be approved by a public referendum. The new law would eliminate that referendum, allowing a new income tax to be imposed simply by the local city council or board of supervisors passing a new ordinance.
Northern Virginia has some serious traffic problems. But none of the counties or cities here sought this authority, and of the leaders I surveyed in all five major jurisdictions, only Arlington board chair Walter Tejada was even open to considering it.
“It’s just another dumb idea coming out of the General Assembly,” said Corey Stewart, chairman of the Prince William board of county supervisors. “We have never requested that power, we don’t want that power and we would never use that power.”
Now this is somewhat ironic, because Northern Virginia has complained for years that Richmond shortchanges us on transportation, and we should have the opportunity to create our own revenue. We even tried twice, in 2002 with a Northern Virginia sales tax referendum (rejected by voters) and in 2007 with a regional, tax-empowered transportation authority (ruled unconstitutional).
But the difference here is that this bill would provide the tax authority to individual localities, not the entire region, which is fairly interconnected when it comes to transportation. “Even if Fairfax County did screw up the courage to do it,” Fairfax Chairman Sharon Bulova said, “if just one or two counties decided to do it, it’s not going to address the problem of our larger, regional problem.”
There’s also the important philosophical question of who should be paying for the roads in the first place. “Transportation is basically a state responsibility,” Bulova said. “And they’re not doing it. It’s a little bit of chutzpah to say the locals should be paying for it, and it’s not fair. It’s not like Fairfax and our sister jurisdictions haven’t been committing tens if not hundreds of millions of dollars on transportation. But we can’t do it alone.” Stewart reminded that Northern Virginia gets about 40 cents back of every tax dollar we send to Richmond, which we’re pretty much used to by now. But still.
The sole sponsor of the local income tax initiative is Sen. Walter Stosch (R) of Henrico County, and chairman of the Senate Finance Committee. ”He’s just looking for a solution, he really is,” said Jeff Ryer, spokesman for the Senate Republican caucus.
Ryer pointed out a number of things about Northern Virginia, transportation and money which have long been true. “We keep hearing that there are regional transportation needs,” Ryer said. “This creates a financing mechanism for those localities that are specifically affected.”
He said the ability to impose the tax may have been hindered by the public referendum requirement, so this bill (Senate Bill 1313) removes that. The current law also has a five-year sunset provision, which hampered the ability to obtain bond money, and this bill removes that too.
Ryer also noted Northern Virginia’s two attempts in the previous decade to create its own roads revenue, with the sales tax and the transportation authority. “NoVa has sought this in the past,” Ryer said. ”We’ve had bills each session that included regional solutions. But the regional solutions haven’t come to the point of enactment. This is a way to simplify the enactment.”
But making this a regional solution would require almost unrealistic levels of cooperation between the four counties and one major city in NoVa, not to mention the smaller cities. “We wanted a local tax authority,” Alexandria Mayor Bill Euille said. “We didn’t want the state to tell us how to spend it...It doesn’t make sense for us locally and we would not be supporting it.”
Prince William’s Stewart pointed out that Virginia’s budget rose from $23.5 billion in 2002 to $39 billion in 2011. “When your income goes up by 66 percent and you don’t have enough money to make ends meet,” Stewart said, “you don’t have a revenue problem, you’ve got a spending problem. They just haven’t made transportation a priority.”
Stewart also noted that “one of the reasons Virginia is so competitive” with other states “is we don’t have local governments imposing income taxes.” He added, “I think the mere threat of a locally imposed income tax will have a dampening effect on investment in the Commonwealth.”
Arlington’s Tejada was not exactly enthused by the idea, but he said, ”We’re following it intently. We’re always trying to find ways to fund transportation projects, and considering we were ranked number one in gridlock, any resources would be helpful.”
Tejada said that “too many times the state has been passing the buck to us.” After the two Northern Virginia tax attempts failed, “ever since then we’ve been trying different things, and traffic’s not going anywhere. So we’re just going to monitor this closely.”
State Sen. Chap Petersen (D) of Fairfax, who voted against the bill, said raising the income tax only penalizes local residents who file tax returns, but not drivers, workers or shoppers from other jurisdictions.
And “once you give a local government taxing authority, inevitably they’re going to use it,” Petersen said. “The General Assembly expects them to use it. If they don’t use it, the General Assembly’s going to say, ’Well, you don’t need the money.’”
The bill is currently in the House finance committee.