News Release

October 16, 2002

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Virginia Tax-Hike Advocates Evade Tough Questions Raised by Cato Report

WASHINGTON -- The Northern Virginia Transportation Alliance has criticized the recent Cato Institute report "10 Reasons to Oppose Virginia Sales Tax Increases" in a recent statement.

The NVTA side-tracks important questions raised by the Cato study and provides erroneous and disingenuous claims for the pro-tax side in this November's sales tax referenda. Some of the NVTA's misfires include:

1) The Cato study pointed out that Virginia state spending has grown excessively. The NVTA cites the Virginia General Assembly Joint Legislative Audit and Review Commission report finding that spending has grown at "only" about 2 percent annually above the inflation rate during the past 20 years. The NVTA gets the facts wrong. The General Assembly report found that annual state spending grew 2.3 percent above the inflation rate plus population growth. Compounded over 20 years this figure amounts to a 58 percent real per-capita spending increase. The Cato study also found that state taxes have grown much faster than Virginians' personal income, meaning that the state is taking an increasing share of workers' incomes. That cannot go on indefinitely, so state taxes need to be reduced, not further increased.

2) The Cato study pointed out that overall state revenues rose very quickly during the 1990s. The NVTA doesn't dispute that, but says that gas tax revenues have "remained flat." It is true that gas tax revenues rose more slowly than income tax revenues, but gas tax revenues still grew faster than inflation. More importantly, a key recommendation of the Cato report was that a small portion of general fund tax growth be dedicated to transportation, since general taxes, such as income taxes, tend to grow faster than gas tax revenues.

3) The NVTA states that Virginia ranks 41st out of 50 states in terms of per-capita taxes. That is a glaring error by the NVTA. The Cato study referenced the Virginia General Assembly report that found that Virginia rose from the 43rd to the 30th ranking by this measure in the late 1990s. The latest Bureau of Census data (for 2001) shows that Virginia ranked 29th by this measure. Virginia's economy has done well because it has been a relatively lower-tax state. To get the state economy growing again, the state should be cutting taxes, not hiking them.

4) The NVTA says that tax hike opponents offer no specific state budget cuts to provide funds for transportation. The Cato report specifically describes how a modest carve-out from future growth in the general fund budget (not cuts) would be sufficient to fund transportation improvements.

5) The NVTA asks what is wrong with letting voters vote on this referenda. Budget referenda would be a useful tool if they gave voters balanced options including tax cut and spending cut options. But November's referendum, which is a one-sided ballot measure.