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Kerry's role model
By Christopher Coyle
This Thursday on the last night of the Democratic national convention, among the 17 speakers slated to speak to the party faithful will be the Democratic governor of Virginia Mark Warner. He has gained much popularity in Democratic circles over the past year due to his success in passing a large tax increase in a state with a Republican legislature, so much so that he was even suggested as a possible candidate for the vice-presidency on the ticket of the Democratic presidential nominee John Kerry. He will be in Boston this week to contrast the budget situation in Virginia, "fixed" with the aforementioned tax increase, to that in Washington, D.C. The analogy the Democrats are trying to make is clear enough and giving Mr. Warner a primetime speaking slot on the closing night of the convention goes far in showing us how a Kerry presidency will attempt to fix the current federal budget deficit.
Mr. Warner ran for the governorship of Virginia in 2001 on the idea of a regional sales tax referendum in northern Virginia in order to raise funds for their notorious highway transportation system. The idea was to increase the sales tax by ½ cent in the northern Virginia counties voting on the referendum to raise $5 billion for various transportation projects. Later on, southeastern Virginian voters in Hampton Roads were brought into the fun as well as they were given the opportunity to tax themselves (as well as their fellow citizens) with a 1 cent increase in their sales tax to raise $7 billion in transportation funds. Warner promoted his initiative as the democratic solution to the state's transportation woes.
It was with such a sentiment in mind that Mr. Warner must have been especially shocked when his referenda were handily defeated in November of 2002. In northern Virginia, 55% of voters shunned the tax increase while in Hampton Roads, an even larger 62% voted against the tax increase. This is despite a well-financed campaign in favor of the tax increase with many prominent Virginian leaders in support, including the state's senior Republican Senator, Mr. John Warner. Mark Warner, who had spent virtually all of his scarce political capital to push through the referendum, was thoroughly embarrassed. The Republicans, in control of the Senate and House of Delegates, could now seemingly breathe a sigh of relief, believing that Mr. Warner had been rendered impotent for the rest of his term. However, the Republicans underestimated the extent to which a Democrat would fight to increase the tax burden of Virginia taxpayers.
As with most states in the past several years, Virginia had to grapple with a weakening economy that was putting a strain on its budget. After proliferate spending for most of the past decade, revenues into the state coffers dwindled, giving Mr. Warner his next big chance to increase taxes. In late 2003, he proposed a $1 billion tax increase for the two year budget starting on July 1, 2004, despite a campaign pledge stating that he was against any state-wide tax hike. His plan would, among other things, increase the state's 4.5 cent sales tax (the very tax he tried to have raised by referendum a year before) by 1 cent, raise the 2.5 cent a pack cigarette tax, which was the lowest in the nation, to as high as 50 cents a pack, and increase the income tax rate on income over $100,000 a year from 5.75 percent to 6.25 percent.
Mr. Warner claimed that times had changed (as they always do with regards to campaign promises) and that the state could not tolerate more spending cuts beyond what had already been done to shore up a $6 billion budget deficit. The message was being made that core services were being deprived, especially education and transportation. The familiar play was that little children were suffering due to the stinginess of anti-tax Republicans. Yet, such a message didn't hold up to much scrutiny. According to the National Taxpayers' Union, spending in the state budget of Virginia increased an average of 6.8 percent annually between 1984 and 2004. During the same time period, the growth of population and inflation increased only 4.3 percent. And throughout the entire budget crisis, the state budget never once decreased from the level of the previous year. Since 2001, spending has increase by over 11 percent, according to Peter Ferrara of the Club for Growth. For the biennial budget under debate, the state budget could have financed an 11 percent increase in government spending without a tax increase. Yet apparently, the state was in a crisis, the result of which would determine the very future of the commonwealth. Eleven percent spending growth was not enough.
However, the only crisis was the runaway spending by the government of Virginia over the past decade. The money Mr. Warner wanted to spend on his priorities was most certainly already there, the only problem being the inability by anyone in Richmond to make any choices. As soon as money can in, it went back out to fund various new programs and pet projects. And as soon as the revenues coming into the state slackened, we amazingly had a crisis on our hands!
Unfortunately, many Republicans were also more than willing to work with Governor Warner to rob the taxpayers of more of their hard-earned wealth. In particular, the state Senate with the help of its Republican finance committee chairman, John Chichester, decided that Mr. Warner's tax increase was not large enough. The Republican-led Senate decided to go over the top of the Governor with a budget of their own which included $4 billion in new taxes. Thus the Democratic governor immediately became the moderating voice in the budget debate! The lone hold out was the Republican-led House of Delegates, the last bastion of anti-tax sentiment. Yet, they too, slowly but surely, gave way to the wave of criticism from supports of the tax increases and their special interests.
First, some Delegates threw out an idea to make the tax increase dependent on a state-wide referendum, modeled after Mr. Warner's failed attempt back in 2002. Surprisingly, giving the voters the decision to tax themselves no longer rang well with the governor! "The problems we face are too pressing to delay for that process," Mr. Warner's spokeswoman said. Apparently, democracy only works when the majority agrees with you! Acquiescing, the House decided to raise revenue by lifting $500 million in sales tax exemptions for some businesses as an alternative to the governor's plan. From that, a plan evolved calling for a slimmed down version of Mr. Warner's original idea. Eventually, the plan that passed was more than what even Mr. Warner originally asked for: a $1.4 billion tax increase with included, among other things, a ½ cent increase in the sales tax, an increase of the cigarette tax to 30 cents a pack, and a freeze at $950 million on elimination of the car tax (the very issue which swept the previous governor, Republican Jim Gilmore, into power). Even after this huge "success," Mr. Warner was apparently not satisfied with the taxes he had already raised. The new budget added nothing in new money for the transportation budget, something that was going to have to be "addressed" in the future. To add insult to injury, it was reported just last week that Virginia will actually end up with a $324 million surplus for the fiscal year which just ended June 30.
This is the "fiscal conservatism" which Mr. Kerry wishes to emulate. Virginia should serve as a warning to Americans on how a Kerry presidency will handle the budget deficit. He will tenaciously fight for higher taxes at every turn and he will never be satisfied; smaller government will never be an option. As in Virginia, this new found money will quickly be put to use until the next economic downturn. Kerry's current plan is to eliminate the Bush tax cuts for those making over $200,000 a year and use that money on new health care programs. How that helps to eliminate the deficit is anyone's guess. But at the end of the day, it's not really about the budget deficit. It's about the desire of those in power, both Republicans and Democrats, to expand the power and scope of government. That is the lesson we all should heed well as we listen to Mr. Warner this week.
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