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Will the Governor's Tax Reform Plan Improve Economic Growth?

Three weeks ago, Governor Warner (D) introduced his tax reform plan with great fanfare by jetting to three locations across Virginia in one day. Despite claiming that he would not raise taxes on numerous occasions over the past two years (see for example a recent Washington Times editorial), the plan will raise taxes by $1 billion. If sucking $1 billion out of the Virginia economy would help the economy grow, then perhaps raising taxes might be justified. However, that would do nothing but grow Virginia government. Using the work of George Mason Univesity economics professor Mark Crain, Jim Bacon, publisher of Bacon's Rebellion, concludes in his lead column on December 1, "Between Crain's research and the improving fiscal outlook, the case for a tax increase will get harder to make with each passing month. Virginia's tax system really isn't broken. Economic growth will generate revenues sufficient to address many, though not all of Virginia's pressing problems." Bacon notes that in Crain's recently published book, Volatile States, "the adjusted per capita income of Virginia residents increased by an average of 1.97 percent per year. That was the seventh-fastest growth rate among the 50 states. If Virginians per capita income had grown at the average rate (1.53%), over the past 30 years, Virginians would be earning between 13% and 14% less than they do now. On this basis alone, it seems, Governor Warner and Senator John Chichester (R), who by many reports supports raising taxes, should not risk the long-term growth of Virginia's economy.


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