Figure 2
Growth in Virginia Tax Revenue vs. Growth in Inflation Plus Virginia Population
12%
General fund taxes
10.6%
10.5%
10.4%
Inflation plus population
10%
9.1%
8.1%
8%
6.9%
6.6%
5.6% 6.0%
5.8%
6%
5.1%
4.4%
4.1%
4.0%
4.0%
3.8%
3.7%
3.4%
4%
3.3%
3.1%
2.8%
2.2%
2%
0.3%
-0.4%
-3.6%
0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
-2%
Source: Virginia Department of Planning and Budget, www.ddpb.state.va.us/budget/budget.htm.
Note: Inflation and population growth are estimated for 2002 and 2003.
In 2003 general fund taxes of $11.2 billion
tive to the government, tax cuts are needed
will fund a bit less than half of the state's
every few years to return the excess revenues.
expenditures of $25.1 billion. The primary
As the economy recovers, state coffers will
general fund taxes are the individual income
begin filling up again, so the state govern-
tax, the corporate income tax, and the sales
ment simply needs to be patient and focus on
tax. The other half of state expenditures is
reviving the state's economy, rather than pur-
funded by federal grants, fees, and other
sue tax increases that could have the opposite
taxes. As noted, numerous taxes and fees are
effect of damaging the recovery.
devoted to funding transportation.
3. Overall Taxes on Virginians Are Too High
General fund tax revenue grew faster than
Tax revenue grew
inflation plus state population every year from
On average, Virginia households pay 31 per-
1993 through 2000, as shown in Figure 2.9 In
cent of their income in taxes to the federal, state,
faster than infla-
and local governments.10 That makes Virginia
1998, 1999, and 2000, tax revenue growth
tion plus state
exceeded 10 percent annually.
25th among the states in terms of total taxes as a
During the economic boom from 1992
percentage of income. A decade ago Virginia
population every
ranked 35th among the states by this measure.11
through 2001, tax revenues almost doubled
year from 1993
with an increase of 97 percent. By compari-
The average Virginia family pays more in
through 2000.
son, Virginia's population rose 12 percent,
taxes than it spends on food, clothing, and
housing combined.12 This is important because
and the consumer price index, which mea-
sures inflation, increased 26 percent.
proponents of tax increases are always quick to
During economic expansions, Virginia's
point out the added "needs" of the state budget.
tax revenues tend to rise faster than incomes,
But Virginia citizens have their own needs,
thus creating a hidden tax increase. In the
which they have difficulty meeting with only 69
late 1990s revenues from the income tax and
cents on the dollar after taxes. State budget
capital gains tax rose particularly quickly. For
needs filled by tax increases mean fewer
citizens to remain in the same position rela-
resources available for Virginia families to use
4