Republican Ed Gillespie is touting a tax cut for “all Virginians” in his campaign for governor of Virginia, but it’s a lie.
He says that the across-the-board 10 percent tax cut will help everyone, but it will only benefit the wealthy while hurting the state’s budget. The GOP-controlled General Assembly rejected multiple tax proposals this past year. So, why does Ed Gillespie want to make a tax cut for the rich the cornerstone of his campaign? As a conservative candidate in a state that’s growing more progressive, Gillespie is pulling a typical Republican move to gain votes by using bad math and lies to promote his tax cut plan.
GILLESPIE’S UNREALISTIC PREDICTIONS
Currently, Virginia has a flat tax rate of 5.75 percent for individuals who make more than $17,000 a year. Yep, a person who makes $17,000 a year is taxed at the same rate as someone who makes $500,000. Gillespie’s proposal would lower the tax rate for everyone from 5.75 to 5.15 percent. However, a corporate executive at a bank stands to benefit more from the income tax cut than a person who works full-time as a manager at a grocery store.
Gillespie says the tax cut will put “$1,300 back into the pockets of a family of four.” What his campaign neglects to clarify is that this “family of four” will need to make $135,000 a year in order to benefit from the tax cut.
Most families in Virginia don’t make that much money. According to the U.S. Census Bureau, Virginia’s median household income for 2015 was $65,015, which is a more accurate portrayal of how much Virginians earn. That means that half of Virginia’s households make less than $65,015 and the other half of the state’s households earn more than that.
Frank Wagner, one of Gillespie’s opponents for the Republican nomination for governor, recently pointed out that Virginia families would actually need to make more than $135,000 in order to receive the tax cut benefit. Wagner broke down Gillespie’s plan with simple math and said that a family would have to earn $214,000 to save the $1,300 that Gillespie is pledging for Virginia families.
Gillespie’s tax cut plan hinges on the notion that the state’s revenue will grow by $3.4 billion over the next five years, but his plan doesn’t specify where the increased cash flow will come from. His proposal also runs contrary to the reality Virginia faced with this year’s $1.2 billion budget shortfall from a decrease in tax revenue. The General Assembly resorted to budget cuts at state agencies and tapped into the state’s rainy day fund in order to pass the state’s two year fiscal budget in 2017.
MAGICAL REPUBLICAN NUMBERS
In early May, Wagner attacked Gillespie’s tax cut plan for using “phony math” and pressured his campaign to show proof of how the tax cut would work. In response, the Gillespie campaign presented the findings of a Boston think tank, the Beacon Hill Institute, a right-wing organization Republicans often consult with that uses distorted economic modeling to justify attacks on climate change policies and government spending. Using Beacon Hill’s math, Gillespie’s campaign predicts Virginia’s future economic growth will come as a result of people spending more money once their taxes are cut. In short: the tax cut will pay for itself!
Gillespie’s math is like Trump’s $2 trillion math error with his budget. To justify tax cuts, both Gillespie and Trump rely on a method called “dynamic scoring,” which is used by conservatives to call for lower tax rates by assuming that tax cuts will stimulate so much economic growth that they will pay for themselves. This is dangerous and vague territory to enter because so many government programs depend on income tax revenue as a major source of cash flow that helps the state balance its budget every year. It accounts for 61 percent of the state’s revenue.
Gillespie insisted that his tax cut, which would cost the state $1.3 billion, won’t reduce spending in education or transportation, areas the state cannot afford to cut. What if the commonwealth does generate an extra $3.4 billion in the next five years. Wouldn’t it be great to spend that money on infrastructure projects, invest in public education, provide student loan debt solutions, lower college tuition increases or replenish the state’s rainy day fund? Instead of cutting taxes for the rich, Virginia’s governor should be looking out for the interests of everyday working people.
VIRGINIANS NEEDS REAL SOLUTIONS TO THEIR ECONOMIC PROBLEMS
According to the Institute on Taxation and Economic Policy, Virginia ranks 35th in the nation in tax codes due to its unfair and regressive policies. How about leveling out the playing field so that lower income people pay less of their income on taxes and the rich pay more? The Commonwealth Institute analyzed the ITEP data and found that Virginians with the lowest incomes pay 74 percent more in taxes from their total income compared to the state’s wealthiest residents.
It’s wrong that Virginians who make $9 an hour working a full-time job are taxed the same as corporate executives who make $250,000 a year. The Democratic candidates for Virginia governor, Ralph Northam and Tom Perriello, are addressing the state’s income inequality by proposing to increase the minimum wage to $15 an hour. Northam is also calling for a cut in the grocery tax for the poor while Perriello is calling for a tax increase on individuals making $500,000 or more.
Obviously, Virginia has a lot of work to do to make the commonwealth more equitable for all of its residents. Gillespie’s tax cut goes against common sense by decreasing state revenue at a time when Virginia is losing money. Less revenue means less funding for programs that Virginians depend on to survive. The solution to Virginia’s economic woes is to not cut taxes for the rich, but to provide more economic opportunities for people from the middle class out.