May 14, 2013

IF HE’S ELECTED governor of Virginia this fall, Ken Cuccinelli II (R) promises $1.4 billion (at a minimum) in state tax cuts, though he neglects to explain how he would do so without reducing funding for services that rely on state government.

Little noticed but also damaging, Mr. Cuccinelli’s “plan” — so far, it’s just a one-page press release — would likely force counties and cities to increase local real estate taxes. Where else could they turn to replace some $900 million in locally imposed business taxes that Mr. Cuccinelli also wants to eliminate?

His Democratic opponent, Terry McAuliffe, has also taken aim at those local taxes, but he at least would give localities the option to replace them with other (unspecified) levies that he’d have Richmond authorize. Mr. Cuccinelli’s plan isn’t about options; it’s about mandates.

The main locally imposed tax in Mr. Cuccinelli’s cross hairs is the Business Professional Occupational License (BPOL) Tax. Businesses dislike that it’s imposed on gross receipts rather than profits. But the BPOL has been around for 200 years; local governments have come to depend on it. So if the state eliminates it, localities would need to replace the lost funds and, unless the state acts, they’d have little option but to raise real estate taxes.

For example, in Fairfax County, the BPOL (plus another small tax Mr. Cuccinelli would scrap) yields about $164 million annually. To compensate for that revenue, county officials say, they’d be forced to add $373 to the average homeowner’s tax bill.

Mr. Cuccinelli insists his plan would be revenue-neutral on both the state and local levels. On the state level, he says he’d find money by eliminating (unnamed) corporate tax breaks. But competition among states to attract investment, and the clout of entrenched interests, make it doubtful he could meet that goal.

Mr. Cuccinelli says he would protect public schools and other local government functions from the effects of his tax-cutting, but once again his plans for doing so are unknown. One idea popular among some conservatives is to broaden the sales tax, to cover currently untaxed services such as haircuts, amusement parks and services by cosmetologists, lawyers, accountants and consultants, and to pass that revenue back to the locals. But that plan, too, gores so many interests that it’s long been regarded as politically impossible.

If Mr. Cuccinelli has another idea, he’s not saying — beyond punting the problem to a commission after he takes office. During the campaign, he promises tax cuts. After the campaign he’ll assign someone else to give them the bad news — that other taxes will have to be raised.

If, as he says, Mr. Cuccinelli has a blueprint to hold state and local revenues harmless, Virginians deserve to hear it.