Virginia’s economy needs a real boost

Published 1:24 pm Tuesday, August 2, 2016

Government bad news is oftentimes released late on a Friday afternoon when taxpayers and voters are least likely to be paying attention.

Late on Friday afternoon, July 8, Gov. Terry McAuliffe announced the state›s budget was going to be $266 million short of its goal. This likely means a $500 million deficit for the two-year budget unless something dramatic happens.

State employees, teachers, college faculty and sheriff’s deputies will not see the pay increases they had hoped for and to which the legislators and governor had agreed.
This shortfall should not be a surprise; government policies or lack of action has consequences.

Federal government anti-growth policies are having an impact. Obamacare cut the definition of “part time employment” from 35 hours to working only 29 hours. And part-time employees do not have to be covered in a company’s health care under the misnamed Affordable Care Act. The “new definition” of overtime, and who needs to be paid for working more than 40 hours, is also reducing payrolls. Also, federal policies are putting thousands of Virginia coal miners out of work. And when that happens, it impacts all those businesses relying on these folks’ payrolls.

So, of course, payroll and income taxes coming into the state treasury are not what our state government wanted. Projections of future economic growth were not accurate because state government underestimated the impacts of federal government policies.

So what can we do to build our economy and put more people on private sector payrolls and thus increase the total taxes paid into our state treasury? We struggle under a tax code crafted about 45 years ago, created for a different economic era. It needs to be re-designed to better reflect today’s economy.

As a starting point, the institute proposes a tax restructuring idea which should create close to 70,000 new jobs during the next five years. This tax restructuring plan is revenue neutral and Virginia’s localities will be kept whole.

Michael Thompson is president of the Thomas Jefferson Institute for Public Policy. His email address is info@thomasjeffersoninst.org.