As Virginians await the day in April when state lawmakers return to Richmond to take up Gov. Glenn Youngkin’s budget vetoes and amendments, one big thing is clear: Our governor’s well-articulated priorities — and combative political posture — now reflect very well the principal delusions of the modern Republican Party.
Lambasting state Democrats on March 14 for passing what he termed a “backward budget,” Youngkin asserted that the General Assembly had “destroyed” economic development, pickpocketed fellow Virginians and moved to fund little more than “pet projects.” Flipping economic history and sound policy on its head, Youngkin urged in the place of this “backwardness” a budget that would do these things instead: make a regressive and weakly performing tax code even more regressive; ignore the real and pressing needs of “pet projects” such as public education, health care, transportation and public safety; and deliver a hallmark “economic development” project that would develop little but the checking account balances of a few favored multimillionaire investors.
People are also reading…
In the first case, perhaps the governor can be excused for his critical delusions, for they are shared widely — even to some extent across the aisle — and are accepted by many in all states of the union. In this otherworldly fiscal policy landscape, up is down, and sales taxes, excises, public service fees, lottery games and highway system tolls are attractive, even preferred, fiscal policy instruments. Relative to income, these taxes ask the poor to contribute more than the rich, tap income more readily spent on necessities than luxuries, and they move dollars not from idle savings or speculative investment schemes to productive and universally valuable public investments, but from ordinary and consistently reliable personal spending streams. In the lingo of professional economists, they tax income of increasing marginal utility, exactly the opposite of any sound approach. They also generate — often gradually and imperceptibly, but without variation — a tax structure that grows more slowly than the needs of an expanding and increasingly complex economy. Here is an attribute, of course, that most of us feel quite readily, and which compels the state to choose between miserly public investment and increasingly higher tax rates. Because many of these regressive vehicles are not obvious and are “felt” much more readily than they are vividly recognized, the higher rate option in this game — as it was this year for Youngkin — is often the popular choice, and our public investments remain just sufficient enough to avoid a multiplicity of crises.
“Don’t tax you, don’t tax me, tax that man behind the tree,” Sen. Russell Long of Louisiana once observed, caustically.
Exploiting the way in which this approach also increases general anti-tax sentiment, the governor and his party have become experts at two economically destructive but politically useful tactics: focusing this sentiment almost exclusively at the already chopped up and neutered income tax (rather than the rickety and regressive tax structure itself) and hinting always that the mix of regressive taxation and stunted public investment is likely still an all-too-generous way to treat certain “undeserving” and overly “dependent” constituents.
As Langston Hughes wrote in 1932, these tactics are among “the lies of color that keep the rich enthroned.” Few should be surprised to learn that, emblematic of this shameful tradition, it was Mississippi that adopted the first state sales tax in 1930, allaying early objections by reminding its White citizens that Black sharecroppers would pay much of the freight. Because it was noticeably less visible than an income tax withheld from a paycheck, this Mississippi innovation also became easy to embrace; herd behavior and timidity ensured that it would spread to all but a few states over the next three decades.
Soon rationalized as a necessary element of a “balanced” structure, the sales tax, and other regressive levies, quickly came to dominate state tax code changes everywhere. But there is no valid economic theory, nor any episode in our nation’s economic history, that recommends a regressive structure built on the sales taxes Youngkin would like to increase, or on any of the other vehicles like the sales tax that imposes lower rates on the rich and higher rates on the poor.
“There are those who believe,” Democratic presidential candidate William Jennings Bryan noted in 1896, “that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below.”
Despite Bryan’s incisive mockery and another 130 years of proof that “trickle down” never worked, Youngkin essentially proposes the same bankrupt idea.
But if Virginians are fortunate, this bankrupt approach will not be revived for the forthcoming “veto session” and we’ll begin to recognize much more clearly than before how modern capitalism and the widespread prosperity that it can engender depend critically on a right-side-up tax structure. Since Virginia is one of 14 states with an essentially flat income tax — to go with the seven that carry officially flat rates — and relies increasingly upon sales and excise taxes and a bewildering assortment of fees, “right-side-up” means reducing — or even eliminating — the taxes our governor would like to increase and graduating or increasing the principal vehicle he’d like to reduce.
Here’s hoping that Youngkin’s proposal remains buried for good, and that our next governor can see through this glass much less darkly.
David Shreve is a former history professor at the University of Virginia and an expert in 20th-century U.S. political history and national, state and local economic policy. Shreve has served on the Virginia Organizing Project Tax Reform Committee, the board of directors for Advocates for a Sustainable Albemarle Population and the Albemarle County Economic Development Authority.