Watchdog of the Taxpayer's Dollar Since 1956 Fairfax VA

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Mr. Chairman and Members of the Committee:

My name is Arthur Purves. I address you as president of the Fairfax County Taxpayers Alliance.

We support your recommendation to reduce the income tax rate for lower-income families. However, we advise against your proposal to increase tax rates for others.

Virginia's current budget crisis is the result of too much revenue, not too little. During the "dot-com" bubble, Virginia received $8 billion more revenue than had been projected in the 1996 Debt Capacity Advisory Committee report. The government made a mistake by assuming that this increase would continue forever, and it increased spending for recurring programs. When the dot-com bubble burst and revenue returned to its normal level, government was over-extended.

The structural problem with taxes therefore is that tax revenues can increase substantially even without tax rate increases.

The long-term nature of this problem was hinted at and then covered up in the Joint Legislative Audit and Review Commission's (JLARC) "Review of State Spending: June 2002 Update." The JLARC reported that after adjusting for population growth and inflation, state spending increased at an average annual rate of 2.3 percent between 1981 and 2001. What the JLARC covered up was how much extra revenue is generated by a 2.3 percent annual growth rate compounded over 20 years. The answer is over $8 billion this year. In other words, if Virginia’s budget had grown at the same rate as population and inflation since 1981, the budget today would be $17 billion instead of about $25 billion.

Additionally, there is no accountability for state spending.

A table on page 11 of the same JLARC report shows that between 1981 and 1997 state inflation-adjusted spending for public schools increased nearly ten times faster than enrollment. It shows that between 1981 and 2000 inflation-adjusted budgets for four-year public colleges increased four times faster than enrollment. There is no explanation why.

It shows that the number of Medicaid recipients has increased four times faster than population growth. Two thirds of Medicaid recipients are welfare mothers. Through subsidized housing, childcare, medical care, and food for unwed mothers, government is creating a financial incentive for out-of-wedlock births. Sixty-five percent of African-American children are born out of wedlock. A disproportionate number of these welfare children end up in our prisons. The JLARC reports that over the last twenty years, prison population has increased nine times faster than overall population. Meanwhile, transportation spending has barely kept up with population.

We are concerned that tax reform is the Governor’s ruse to raise taxes. We believe that you should instead be demanding an accounting for wasteful and possibly destructive social spending increases that have occurred over the last twenty years. We do not need tax reform. We do need spending reform, and lower taxes.

Thank you.

Updated September 27, 2003