Fiscal Crossroads of 2008

The United States is facing a dire fiscal situation if significant changes aren't made in the next decade. Reigning in federal spending is as important as any issue facing the United States in the 21st Century.

On March 15, The Wall Street Journal published an excellent column by South Carolina Governor Mark Sanford addressing the crossroads we find ourselves at in the 2008 election.

Last week, I asked David Walker, the U.S. comptroller general, why he is quitting his job to travel the country on a "fiscal wake-up tour." His answer: Because we have only five to 10 years to address the federal government's looming shortfalls before we're faced with a fiscal crisis.

In about a decade, the twin forces of demographics and compound interest will leave few options for solving the fiscal mess Washington has created. By then, our options will all be ugly. We could make draconian spending cuts, or impose large tax increases that will undermine our economy in the competitive global marketplace. Or we could debase the value of the dollar by printing a large amount of money. This would shrink the overall value of the federal government's debt. It would also wipe out the value of most Americans' savings.

Mr. Walker is right. And I join many others in saying that federal spending is now as significant an issue as the war on terror, federal judgeships and energy independence. The U.S. stands at a fiscal crossroads -- and the consequences of inaction, or wrongful action, will be real and severe.

Continue reading here.

A Consequence of Gas Tax Increases

Some legislators are proposing a statewide gas tax increase to fund transportation. Besides the prospect of reaching a point of diminishing returns as gas prices spike and Virginians eventually begin to drive less, a gas tax increase is also poor policy because it serves to perpetuate Virginia’s donor status when it comes to federal distribution of transportation dollars.

Currently Virginia only gets back 92 cents for every dollar sent to the federal government. The higher our state gas tax, the lower the likelihood the federal government will equalize what Virginia gets back versus what we already send to Washington.

While some legislators may want to subsidize transportation projects in recipient states, the vast majority of Virginians might not.

Below are the rate of return figues for all 50 states.

Alabama

106.91%

Alaska

526.85%

Arizona

92.00%

Arkansas

105.44%

California

92.00%

Colorado

92.00%

Connecticut

128.69%

Delaware

163.92%

Dist. of Col.

423.03%

Florida

92.00%

Georgia

92.00%

Hawaii

175.54%

Idaho

143.78%

Illinois

92.00%

Indiana

92.00%

Iowa

92.00%

Kansas

95.01%

Kentucky

96.14%

Louisiana

95.48%

Maine

95.62%

Maryland

92.00%

Massachusetts

92.00%

Michigan

92.00%

Minnesota

92.00%

Mississippi

95.80%

Missouri

97.80%

Montana

227.10%

Nebraska

99.12%

Nevada

93.53%

New Hampshire

100.47%

New Jersey

92.00%

New Mexico

114.22%

New York

109.79%

North Carolina

92.00%

North Dakota

207.44%

Ohio

92.00%

Oklahoma

92.00%

Oregon

101.87%

Pennsylvania

113.33%

Rhode Island

217.23%

South Carolina

92.00%

South Dakota

197.75%

Tennessee

92.00%

Texas

92.00%

Utah

92.30%

Vermont

204.85%

Virginia

92.00%

Washington

92.00%

West Virginia

169.31%

Wisconsin

102.95%
Wyoming

151.89%

Where Does Your Money Go?

When a Virginian buys groceries, purchases a cheeseburger and fries, or pays a utility bill, he or she is presented with a receipt detailing the cost of individual items or services purchased, the tax included in the total, and a total amount due. The issuance of an itemized receipt is a standard practice that holds the retailer accountable and makes the customer aware where every penny goes.

Because Virginians are limited insofar as their ability to take their business elsewhere when it comes to paying taxes, that is all the more reason to demand an itemized tax bill that details how much and on what services government is spending their hard earned money. With Virginia facing an uncertain fiscal outlook over the course of the biennium and beyond, and the ever present specter of tax increases lurking on the horizon, it is imperative that Virginians know how their money is being spent.

Virginia's Auditor of Public Accounts recently created a new webpage using Commonwealth Data Point titled "Where Does Your Money Go?" This page is a step forward in efforts to put transparency in taxation into action and allow Virginians easy access to such information.

Back in 2005, in a victory for transparency, Senator Walter Stosch secured passage of legislation which required Virginia's Auditor of Public Accounts to create a website, now called Commonwealth Data Point, where anyone can access state expenditure, revenue, and demographic data for the last decade. Building on this achievement, Delegate Saxman worked with the Auditor’s office to expand the functions of Commonwealth Data Point to include a website that puts itemization into action.

Using this website, anyone can enter an amount of individual income tax, sales and use tax, or other direct taxes paid by an entity or individual to the state of Virginia for the prior fiscal year and generate a report displaying, both in percentages and real dollars, how their general fund tax dollars were spent. The report also gives percentages for the four previous fiscal years as well—meaning Virginians can see how spending priorities have changed over time.

For example, according the Data Point, if a Virginian pays $1,000 in income taxes, 35 percent or $350 of that was spent on K-12 education in Fiscal Year 2007. Taken in comparison with the four prior fiscal years, it is clear that spending on education has increased from 31 percent in 2003 to 35 percent in 2007—with no appreciable increase in the quality of education or quality of outcome in Virginia’s public schools.

Transparency can still improve in Virginia, but this is a major positive development.

Take a moment to look at the new Data Point website here.