How to survive raising taxes

The three incumbents running for Williamsburg City Council were all re-elected Tuesday, despite the fact that next Thursday they will almost certainly approve a budget that increases taxes, possibly multiple taxes.

When City Manager Jack Tuttle proposed a budget two months ago that included increases in the real estate tax rate, personal property tax rate, cigarette tax and in EMS fees, I wrote that he'd "thrown the three incumbents up for re-election a live hand grenade."

When it became apparent that only one challenger would run, with three seats up for grabs, there seemed to be a good chance that Mayor Clyde Haulman, Vice Mayor Paul Freiling and City Councilwoman Judy Knudson would end up in a game of hot potato with that grenade, with whoever got caught holding it getting an unpleasant surprise.

Challenger Ginger Crapse, though in her own words "a rank amateur" as a politician, latched on to the tax increase issue with laser-like focus and showed message discipline worthy of Jim "No Car Tax" Gilmore or George "Liberal, Lenient, Parole System" Allen.

Crapse even got some odd "good luck" on the campaign's final weekend. She was out campaigning door to door when she saw a house on fire and ran into it to alert the residents. While Crapse may have dramatized her role in the incident a little -- some published reports had her "kicking in the door," which didn't happen, and the residents said they already knew there was a fire -- the fact remains that Crapse saw a burning building and ran into it to try to help people. She ran to the sound of the guns. A lot of people would not have done that.

But neither anti-tax fervor nor firefighting helped Crapse much on Election Day. In a very low turnout election, she finished nearly 300 votes behind Knudson, 400 behind Haulman and Freiling.

And it wasn't really a surprise.

As the campaign played out, two things were obvious -- that Williamsburg didn't care too much about this election and that Crapse had failed to spark a tax revolt.

The lack of enthusiasm for the election was likely because for the first time in five election cycles there was no candidate from the College of William & Mary. The presence of student candidates had boosted participation in Council elections by students (who wanted to elect one of their own) and by townies (who, by and large, wanted to prevent that from happening). When then-student Scott Foster broke through in 2010, leading the ticket and amassing more votes for Council than anyone has in the last ten years, the urgency went out of that effort.

So turnout dropped to under 15%. That could have helped Crapse. But it ended up making no difference.

Why didn't her anti-tax message resonate more with Williamsburg voters?

Some of the reasons are peculiar to Williamsburg. The city has a very low 54 cents per $100 real estate tax rate. It's lower than either of the adjacent counties. That may be a situation that's unique in Virginia. The reason Williamsburg has such a low rate is that it relies much less on the real estate tax to fund government than other Virginia localities. For years, tourism-related taxes, principally the hotel room tax and the meals tax, have provided more than half of the city's budget. That percentage has fallen some during the Great Recession, but Williamsburg still depends less on the real estate tax than most localities.

A second uniquely Williamsburg factor is that city voters are spoiled. For their Yugo level of real estate taxes they've enjoyed a Cadillac level of government services over the years, with tourists footing the bill. They don't want to lose those services.

As an example, in most localities in Virginia, and probably in most in the United States, garbage pickup is once a week. You pay a fee for it and you have to pull your can out to the street. Until two years ago, Williamsburg had two garbage pickups a week, for no fee and the garbage men would go around to the side or the back of your house to get the trash and then take the empty cans back.

When the city cut back to one pickup a week two years ago, still with no fee and still without requiring residents to pull the cans to the street, many residents reacted as if the world would end. It didn't and the city saved about $800,000.

So, I think it's fair to note that Williamsburg voters are more predisposed to favor increased taxes to reduced services than most across the state.

Still there are some lessons from Williamsburg that could be applicable to other local government or even the state when tax increases are needed. And, yes, sometimes they are needed.

1. Don't make a tax increase the first option - It certainly wasn't in Williamsburg, which last raised taxes more than 20 years ago. City Council has cut the budget in four of the past five years to deal with the recession. They've cut services. They've cut personnel. They've cut back on employee benefits. As a result the proposed Fiscal Year 2013 budget, even with the tax increase, is smaller than the FY 2009 budget.

2. Explain why it's necessary -- In Williamsburg a tax increase was needed because the city got hit with a perfect storm of forced expenditures and reduced revenues at the same time. State-mandated increases in VRS contributions from city employees and for school teachers hit the same year that the city's percentage of children in the Williamsburg-James City County school system went up for the first time in 20 years, likely because the recession left some folks who would have bought houses in one of the counties renting in the city. The city's costs for employee healthcare were also up. In addition the city's real estate revenues were off because of reduced assessments. And the room, sales and meals taxes, while recovering, have yet to regain pre-recession levels. The end result was a hole in the budget of about $900,000, which the tax increases and further cuts in expenditures would fill.

3. If you have to raise taxes make it as little as possible - Taking a page out of the General Assembly's book, the current Council asked Tuttle and Finance Director Phil Serra to come back with more optimistic projections for room and meals tax revenue, which would cut about $300,000 out of the hole to be filled. That's possible because, as Crapse rightly noted in the campaign, for years Tuttle and Serra have lowballed those revenue estimates. That's a conservative form of budgeting that has led to the city generally outperforming the budget and guaranteed that any end-of-the-fiscal-year surprises were good ones. Council may yet regret this decision.

4.  All taxes are not created equal - The proposed budget include a 3-cent increases in the real estate tax, a 50-cent hike in the personal property tax and a nickel increase in the current 25-cents per pack city cigarette tax. To the extent that any organized opposition has been raised to the increases, the jumps on the personal property tax and the cigarette tax have been most strongly opposed. Businesses in the city feel that the personal property tax hike hits them disproportionately because they pay the tax on more categories of property than private citizens. Freiling, at least, has publicly agreed with this and might favor a larger real estate increase and smaller personal property tax increase. One city convenience store has said the cigarette tax already put them at a competitive disadvantage to stores in the counties, which can't levy such a tax. They fear an increase would put them at a bigger disadvantage. As a smoker who spends a lot of time in the area, I'd be surprised if people are price shopping for cigarettes. Especially since it's almost impossible to remember exactly where the city stops and the counties start. Look at Williamsburg on a map some time; it's shaped like an amoeba.

5. Play your cards close to the vest - Although all three incumbents made it clear they "weren't necessarily opposed to a tax increase," none of them exactly jumped out in front and led the parade for it. Haulman at one point said, "This isn't our budget, it's the city manager's budget." All three said it was "too early to tell" about the tax increase because of lingering uncertainty about the state budget and the school system's budget. Freiling probably came the closest to advocating the tax increase when he said the hole in the budget was so large that he couldn't see how the city could fill it "without some increases in revenue."
The bottom line was that the three incumbents knew the election was on May 1 and they didn't have to go on the record voting for a tax increase until May 10.

Ten things that are plucking my last nerve

On Facebook, I usually call this "Things I Hate." But I'll try to confine myself to political topics here and we'll just say these are things that are on my nerves, as the 2011 campaign rushes to a close and the 2012 presidential election kicks into gear.

1. The assertion, generally by Republicans, that a requirement to bring photo ID to the polls has something to do with curbing "voter fraud."  One candidate even said in debate the other night that voter fraud was on the rise in Virginia. When asked to provide an example he, of course, could not. Look, you don't steal an election where the votes are cast, you steal it where the votes are counted. Anybody who gave this issue about ten seconds of thought would realize you can't fix an election by voting fake voters. It's too cumbersome, requires too many people to be in on the scheme. It's a silly idea. We've had three presidential elections in this country that might have been stolen -- 1880, 1960 and 2000. If they were, they were all stolen after the polls closed. So, when Republicans get serious about voting machines with computer software that can't be easily hacked and paper trails to allow an accurate recount, I'll believe they care about "voter fraud." Until then, they're just trying to suppress the vote.

2. Stupid campaign charges. I've got to call out Sen. John Miller's campaign on this one. Miller (D-1st), who's been accused of having a conflict of interest for taking a job with a local aviation company after voting for a bill that gave them a tax break, accused his Republican opponent Mickey Chohany of having a bigger conflict. The issue? That Chohany twice voted for street improvements on the street where his restaurant is located. Look, I've been in that business, I understand "Deny, deny and make counter accusations," but make them sensible. The street improvements were included in packages of citywide street projects that were recommended by the city administration, not Chohany. It's like saying a City Council member has a conflict because he votes to repave every street in the city, including the one he lives one. For the record, the allegation against Miller is more serious. I don't think it rises to the Phil Hamilton level of a violation of the conflict of interest laws that needs to be prosecuted. There's no evidence of quid pro quo. At the same time, it looks bad and -- if in my opinion -- he shouldn't have done it.

3. Republican presidential debates. The only person more exhausted than I am by the multitude of debates is apparently Rick Perry. I might join him in his resolve to ignore some of them. Of course that won't have the consequences for me that it will for him. If you can't win a debate against Rick Santorum and Michele Bachmann, you aren't going to stand much of a chance against Barack Obama.

4. The way some people who cheered on the Tea Party rallies last year, mock the Occupy Wall Street rallies this year. And, I suppose, vice versa. Before the Tea Party got co-opted by the Republican Party, it expressed a lot of the same populist outrage that Occupy Wall Street does. In my view, this is a country long in need of a little healthy populist outrage. The nightmare of the powers-that-be is that the Occupy Wall Street folks and the Tea Partiers might realize that they're mad at some of the same people. That graphic going around the Internet isn't a total joke; there is an intersection of interest between the Tea Party and Occupy Wall Street around the too chummy relationship between government and business.

5. Michele Bachmann. Voice like a razor blade, crazy eyes and crazier ideas. Come back, Sarah Palin, all is forgiven.

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Washington is psychotic

"You'll get mesmerized /By alibis/ And limbo dance in pairs/ Please lock that door/It don't make much sense/That common sense/Don't make no sense/No more"

John Prine

"Common Sense"

It's hard to believe that people we elected to represent us and who swore to act in the best interest of the United States and its citizens could have pushed the country to the brink of default just to make a political point.

But it's true.

With about ten days to go until the Aug. 2 deadline for raising the debt ceiling, Washington has shown that it's gone from being dysfunctional to being psychotic.

Our capital and our government have been dysfunctional for a number of years due to the inability of Democrats and Republicans to work together on anything. That had negative effects on the presidencies of Bill Clinton and George W. Bush, but the cancer of partisanship has metastasized in Barack Obama's administration.

There's enough blame to go around for both sides. But in the debt ceiling debate, the Republicans are acting crazier than the Democrats.

While Obama has laid out plans that include up to $4.5 trillion in deficit reduction over the next ten years, Republicans have turned them down flat. Why? Because, in addition to a lot of spending cuts that would trim programs that help lower and middle-income families, Obama has included tax increases on corporation and one the wealthiest Americans.

So have the "Gang of Six" in the Senate, which includes Virginia's Mark Warner.


But Republicans, who have clamored loudest about the deficit (which they discovered about the time Obama was sworn in), have said that deficit and debt reduction needs to be done with budget cuts only. Some of the cuts they advocate are sweeping and would change Medicare and Social Security, as we know them.


It's an example of just how unserious about deficit reduction they are. As recently as January they fought tooth and nail to retain the Bush era tax cuts, which contribute to the deficit.
This attitude led David Brooks, a mainstream Republican columnist, to say that Republicans aren't operating more like a normal political party.

He's got a point.

Republicans are now acting more like a religious cult than a political party. They've raised a "no tax increases ever" ideology to level of Gospel. It's the Church of Ronald Reagan, except that it's run by people who have made commandments out of a few of the dumbest things Reagan ever said and ignore what he actually did while in office.

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Obama proves he's politically nimble

After Democrats got "shellacked" in this year's elections, many wondered how long it would take President Barack Obama to move "back to the center" in the face of an incoming Republican majority in the House and a diminished Democratic majority in the Senate.

Turns out it took about a month for Obama to get on top of the situation.

And, he didn't really have to go all that far to get "back to the center," particularly compared to the incoming class of Republicans.

Although the recent deal Obama cut with the Republicans on the Bush tax cuts was roundly denounced by liberals in and out of Congress, it seems he was fairly adept at using what Republicans wanted above all else -- a tax cut for rich folks -- to get something Democrats had no other chance at -- a second stimulus package.

Republicans, who won the election saying they cared about the deficit, quickly showed where their allegiance really was, negotiating a major increase in the deficit for a two-year extension of the George W. Bush's tax cuts for those making more than $250,000 per year.

They've also put themselves in a position where they are virtually forced to vote for an increase in the nation's debt ceiling, which will alienate their Tea Party backers, to pay for the tax cuts they asked for.

The deal includes other tax cuts, including a temporary roll back of the Social Security payroll tax, that will pump money into the economy. It also included an extension of unemployment benefits. That's something that Obama and the Demcrats wanted, but had no way to get past Republicans on their own.

Those measures can only help the economy by putting more money in the hands of people very likely to spend it. Obama hopes that it helps enough to win him re-election two years from now.

In return, the GOP really got only part of what it wanted. Republicans campaigned on and negotiated for making all of the Bush tax cuts permanent. Instead they've only been extended for two years. That includes a restoration of the Estate Tax at 35% on estates worth more than $5 million. While some Democrats think that's too much, the Republicans wanted no inheritance tax at all. The two-year extension means the GOP's insistence on cutting taxes for the wealthy and trying to ensure Paris Hilston inherits as much as possible while resisting help for working folks struggling during the recession remains a potent campaign issues for Democrats in 2012.

About the only place where Obama stumbled, and this is a mistake he's been prone to, is that he wasn't tough enough in negotiations. He underestimated how much Republicans wanted that tax break for the well off.

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Rotten to the core

So now we have a budget.

It’s an ugly, ugly budget.

Granted, it’s not as bad as it could have been.

That’s because the Senate prevailed and scaled back some of the cuts that the House of Delegates and Gov. Bob McDonnell had proposed for public education. Still, with the cuts the legislature added and those in former Gov. Tim Kaine’s introduced budget, public education got hit for about $1.2 billion in the next biennial budget.

That’s more than a quarter of the $4.2 billion in reductions that had to be made due to declining state revenues.

Ugly.

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Hiding out in the Governor’s Mansion

There’s something odd going on in Richmond.

It’s a budget year and there’s a process the state normally goes through to reach a balanced budget.

In a gubernatorial election year that process starts with a proposal by the outgoing governor.

Gov. Tim Kaine did his part, although nobody liked his contribution. He proposed a budget with more than $2 billion in cuts and more than $1 billion in tax increases to fill a hole in the next biennial budget that may be as big as $4.4 billion.

With Republican in firm control in the House and “No Tax Increases” Bob McDonnell newly installed in the Governor’s Mansion, the tax hike was quickly disposed of.

But that’s where the process has broken down. Because the next step in the process should be budget amendments submitted by the new governor to change the old governor’s budget.

While McDonnell has submitted a few amendments to balance new spending programs he’s proposed – largely economic development measures – he has not addressed the large cuts that need to be made to balance the budget. Even if McDonnell were to accept all of Kaine’s cuts – and the new governor has said he disagrees with some, including cuts in public safety, higher education and state employee retirement contributions – he needs to make nearly $2 billion in cuts. If he restores any of Kaine’s cuts, he’ll need to make even deeper cuts.

But the governor has not submitted any budget amendments to propose those cuts.

And recent comments by his press secretary suggest that he may not.

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When ‘No Tax’ pledges come home to roost

In 2005 Bob McDonnell won an attorney generals race that went to a recount.

By the time the 2010 session of the General Assembly is over, he might want a recount of the 2009 governor’s race that he won in a landslide.

Because Virginia’s new governor faces a no win situation.

McDonnell campaigned on a pledge not to raise taxes. And he’ll honor that promise. He comes form the branch of the Republican Party that believe any tax, at any time, is evil. He’s a believer in the Gospel according to Ronald Reagan. (St. Ronnie, like my Dad, was apparently from the old “Do-as-I-say-not-as-I-do school. Both as governor of California and as president, he raised taxes when he thought it was appropriate.)

So there won’t be any new revenue to plug the $3 billion hole in the state’s next budget.

And, the commission that monitors the state’s debt just informed the governor and the General Assembly that they can’t borrow any more money, either.

Actually, McDonnell and the legislature could raise the state’s debt ceiling. But that’s not exactly a conservative way to begin one’s administration. And it could put the state’s AAA bond rating at risk. McDonnell certainly doesn’t want to be the governor who lost Virginia’s AAA rating, which it has held for more than 70 years.

If you can’t raise taxes and you can’t borrow money, the only thing left is to cut the budget.

Theoretically, that’s not a bad position for a Republican governor to be in. After all, the Republicans are supposedly the party of small government. They could see this as an opportunity to scale back state government.

Except they’ve been beaten to it. Liberal Democratic Gov.

Get your money for nothin' and your roads for free

As was inevitable, transportation has become a major issue in the race for governor.

Democrat Creigh Deeds, apparently emulating Richard Nixon in 1968, has a secret plan to fix the transportation problem, which he’ll tell us more about after he’s elected. He has said he wouldn’t rule out a tax increase, which means he’s thinking about the problem in slightly more realistic terms than Republican Bob McDonnell.

McDonnell, to his credit, has come up with a detailed transportation plan. Unfortunately, like most of the Republican plans over the last five years, there’s not a lot of real money in it. Like Dire Straits, McDonnell plans to get his money for nothing.

Because McDonnell’s plan is another GOP “all gain, no pain” plan. It contains a lot of real debt, $4 billion in bonds, and a lot of theoretical money to service that debt.

The plan recycles some ideas that House Republicans have floated over the last several years.

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