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1/28/10 Dumping "Katrina Cars" on Unsuspecting Virginians

1/22/10 VOP on NPR's Morning Edition

1/18/10 VOP: Kaine Leaves Virginia’s Felony Disenfranchisement Laws Stuck in a Jim Crow Past

1/14/10 Rep. Perriello at 1/13 Health Care Affordability Summit

1/14/10 Guess who’s funding the anti-Perriello ads?

11/25/09 Charges dropped against Joe Szakos, the Anthem Blue Cross customer arrested for questioning rate increases

Great New Books on Organizing:

For too many years, Virginia’s governors and state legislators have known there is a problem with our tax code. Commission after commission has met to study the problem and make recommendations that sit on the shelf gathering dust.

It requires a push from the citizenry of Virginia to make them take action. VOP hopes to be part of that push, and we want to invite you to participate as well.

Below you will find links that will provide information and suggestions for you to use in our common work.

The Virginia Organizing Project’s Blueprint

for Progressive Tax Reform in Virginia

December 28, 2009

GOAL: To make Virginia’s tax structure fairer, more capable of sustaining and advancing the public investment needs of a modern state, and more conducive to widespread prosperity.

RECOMMENDATIONS: The Virginia Organizing Project calls for five critical tax policy changes:

1. Eliminate the state personal income tax deduction for federal itemized deductions greater than the state standard deduction;
2. Modernize the state’s personal income tax brackets to adjust for past inflation and income growth;
3. Increase the standard deduction to $5,000 for individuals & $10,000 for joint returns, up from $3,000 and $6,000, respectively;
4. Establish a new higher personal exemption amount of $1,200, up from the current $930;
5. Eliminate the state and local sales tax on purchases of food for home consumption (currently 1.5% state and 1% local).

IMPACT: These five changes will collectively (1) reduce taxes for the majority of Virginians, (2) raise approximately $1.1 billion annually in new state general fund revenue, and (3) stimulate greater economic activity and opportunity. The last result will be accomplished by helping to finance public investments that raise the aggregate income of key public servants (teachers, public safety officers, health care professionals and others) whose earnings move rapidly back into the marketplace and the state’s economy. These reforms will also make the state’s tax structure an increasingly stable one much more closely aligned with the key “ability-to-pay” tax principle.

Rationale: The amount of this special deduction, taken on Line 10 of Virginia Resident form 760, rises along with income at a rate that exceeds the corresponding increase in state tax liability, creating an additional tax benefit for the wealthy and forcing the state to raise more of its basic revenue needs from middle class and working class Virginia families. Because this deduction is taken on income taxed at a rate no higher than 5.75%, its positive attributes (the encouragement of home-buying or charitable giving, for example) are minimal and are outweighed by forcing more of the state’s tax load onto low-income Virginians. Its elimination will also eliminate the so-called “donut hole” into which many middle class Virginians fall, when one’s total deductions are less than the federal standard deduction but greater than the state standard deduction, a situation that disqualifies them from itemizing deductions on the state tax return.

It should also be noted that any Virginia taxpayer whose state tax liability is increased by this proposed change will also see a partially offsetting reduction in federal tax liability. This is because all affected by this change would be able to itemize on their federal return and would receive, therefore, an extra federal deduction in the amount of the increased state income tax liability. Collectively, this is tantamount to an unrestricted federal grant that would reduce approximately 30 percent of the overall tax increase for every person affected.

Estimated Revenue Effect: +1.6 billion (with approx. $450 million returned to Virginia tax payers through increased federal deductibility.)

Rationale: Virginia’s current bracket structure, comprised of four brackets (2% of taxable income up to $3,000; 3% of taxable income from $3,001-5,000; 5% of taxable income from $5,001-17,000; and 5.75% of taxable income over $17,000 has not been adjusted for inflation since its initial construction in the late 1910s and 1920s. As one of only 15 states that have failed to update their graduated income tax structures in this manner, Virginia has allowed its income tax structure, once officially graduated, to become essentially flat, especially with its highest bracket applicable to all income over the low figure of $17,000. We recommend a new bracket structure with an additional bracket and wider ranges of taxable income within each bracket:

2% of taxable income up to $5,000
4% of taxable income from $5,001-$25,000
6% of taxable income from $25,001-$50,000 (1)
7% of taxable income from $50,001-$100,000
7.5% of taxable income over $100,000

Estimated Revenue Effect: +$400 million (with approx. $80 million returned to Virginia taxpayers through increased federal deductibility.) (2)

Rationale: To partially offset the effect of Policy Change #1 (elimination of the deduction for excess itemized deductions) we recommend a new higher standard deduction. This will offset the increased taxes resulting from policy change #1 for many in the middle income range. With the modernized and expanded bracket structure in policy change #2, this higher standard deduction is an appropriate way to adjust the current standard deduction for the inflationary adjustments built into this tax reform package.

Revenue effect: -$544 million (approx. -$136 million for every $1,000/500 increase in the standard deduction)

Rationale: As with the proposed increase in the state’s standard deduction, this higher personal exemption amount is an appropriate way to adjust the current exemption for the inflationary adjustments built into this tax modernization reform. The personal exemption amount should be adjusted less dramatically than the standard deduction because it has been changed much more frequently and recently. Since it is multiplied by the number of family members before it is inserted on each tax return, its effect on many households would be much greater than the modest exemption increase itself. The $270 increase corresponds closely to the theoretical automatic cost-of-living increase designed to reflect the inflation of the last two decades.

Estimated Revenue Effect: -$85 million

Rationale: Along with the state’s numerous excise taxes and fees and its general sales tax, Virginia’s current sales tax on groceries is one of the more regressive elements in the current state tax structure. As a percentage of income, its effective rate rises as income declines. It creates an unnecessary hardship for Virginia families. It also stifles the vital spending power of those most heavily affected, persons whose incomes are by necessity channeled quickly and entirely back into the state’s economy. Replaced easily by a small portion of the modest income tax changes proposed, this regressive tax should be eliminated in favor of the much more stable and economy-enhancing graduated income tax.

Estimated Revenue Effect: -$350 million

(1) While the last three brackets in the proposed structure introduce higher marginal rates for income over $25,000, all those subject to the 6% marginal rate and many of those subject to both the 6 and 7% marginal rates will still have a lower effective tax rate after restructuring (due to the wider income range within the lower marginal rate brackets).

(2) When introduced in combination with proposal #1, the revenue effect of this proposal and proposal #1 will be altered somewhat so that one cannot determine the approximate effect of the combined reforms by simply adding the two separate revenue effect estimates.