Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 19, 1992 TAG: 9201200219
SECTION: EDITORIAL PAGE: B-2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
RAISE AND REFORM THE SALES TAX
GOV. WILDER'S 1992-94 budget proposal treats public education better than most other programs. But it doesn't treat it nearly well enough.There's no money for teacher pay raises. Is the gap between the Virginia and the national averages, after narrowing significantly in the '80s, to continue widening in the '90s?
There's none of the $212 million needed to fund the first two years of the administration's own plan for easing school-funding disparities. Is the plan, under fire anyway for being too little and too slow, to be jettisoned?
It is not enough to wait for revenue miracles. Virginia's long-term prosperity depends in large measure on how well its labor force of tomorrow is being educated . . . now. Money alone can't do the job, but the job can't be done without money.
Virginia should add as much as $850 million in 1992-94 school money by (1) raising the state sales tax a half-cent, earmarked for education; and (2) shifting to schools the portion of the sales tax now earmarked for transportation.
Currently, the 4.5-cent sales tax in Virginia breaks down like this: 2 cents to the state's general fund, 1 cent that's a local-option sales tax (all localities have opted for it) for which the state is merely the collection agency, 1 cent earmarked for education, a half-cent earmarked for the state's transportation agency.
Under our proposal, a 5-cent sales tax would break down like this: 2 cents for education, 2 cents for the state's general fund, 1 cent of local sales tax.
The chief argument against the sales tax is its regressivity. It's a strong argument, particularly in a state such as Virginia where food is not exempt. The answer, rather than to further complicate the tax with more exemptions, is to establish a refundable income-tax credit for low-income Virginians. This could offset the impact of a sales-tax increase for those least able to pay it.
Meanwhile, there are strong reasons for raising and reforming the sales tax in the manner we suggest:
Earmarking the additional revenue for schools would ensure that the money is spent on Virginia's highest-priority item. But the encumbrance wouldn't further complicate state tax policy, since the principle of earmarking a portion of the state sales tax for education is already established.
Doubling the sales taxes dedicated to education, by sustaining funding levels (and thus softening the blow) to the wealthiest school districts, would make it easier for sales-tax school revenues to be allocated according to localities' wealth and need. This would be fair, and would reduce the likelihood of costly school-disparity litigation.
Upping the rate to 5 cents but no more would keep sales taxes in Virginia less than state and local sales taxes in 36 other states and the District of Columbia. Virginia's state-local rate would be the same as in seven other states, including Maryland, and more than in only six. It would be less than in all adjoining states except Maryland.
Providing more state school money to localities would ease pressure for local tax increases. This, like a refundable income-tax credit for low-income Virginians, would help offset the regressive character of the sales-tax increase, because local tax sources also tend to be regressive.
Eliminating the transportation earmark from the sales tax would force road-building and other transit programs to rely more heavily on traditional user-fee sources such as the state gasoline tax. To make up the sales-tax revenue loss by itself, the state gas tax would have to rise about 7 cents to some 24.5 cents per gallon. But it shouldn't be out of the question for credit-worthy Virginia to issue road and mass-transit construction bonds to offset much of the road-revenue loss; a smaller gas-tax increase could be used to service the debt.
Providing $850 million in new money for schools over the next biennium - combined with continuing education reforms - would offer more than a token effort, would send a signal to the world that Virginia is serious about its future competitiveness.
The issue, ultimately, is whether Virginians have faith in their future. If we do, we should commit to invest in it. We can afford a 5-cent sales tax.