local jurisdictions have different levels of capacity - and willingness - to generate adequate tax revenue
Source: Virginia Department of Housing and Community Development, Report on Comparative Revenue Capacity, Revenue Effort, And Fiscal Stress of Virginia’s Cities and Counties FY 2021
Taxes are the price we pay for the services we receive from our government organizations - local, state, and national.
At the Federal level, Congress and the President can approve budgets that exceed revenues. The Federal government determines monetary policy as well as tax policy, and can choose to spend more than the Federal government collects in taxes.
Deficit spending is not an option for state/local officials in Virginia; they must balance their budgets. Article X of the Constitution of Virginia authorizes the sale of bonds to borrow money for 30 years for capital projects, and permits a limited amount of short-term borrowing as well, but the basic requirement is for the General Assembly and Governor to approve budget based on anticipated revenues.
The state has a two-year budget cycle, with a complete budget adopted in even-numbered years and amendments approved in odd-numbered years. The state Constitution requires that:1
The challenge for elected officials is to generate the revenue required to pay for the services that will be provided by local or state government, without spurring voters to get upset enough to elect replacement officials.
Voters (and non-voters) always complain about the high cost of taxes, whether taxes have been raised or lowered. It's also traditional for voters to complain about the efficiency and effectiveness of government services. In every election, someone will assert that the taxpaying "customers" are not getting a fair return on their investment because lazy government workers lounge at the office, eating chocolates and watching Oprah rather than doing their jobs with energy and creativity, and elected officials are not providing appropriate guidance/oversight.
Cutting out the presumed waste in government spending is not a simple process. What one voter perceives to be a "scandalous misuse" of tax dollars may be a "wise investment" in the eyes of someone else.
Cutting government costs without reducing services that are appreciated by the voters is like trying to find the fat marbled through a piece of steak. One solution may be to avoid fueling the development of fat in the first place, even at the cost of reducing some muscle too. Some people advocate putting the entire cow on a diet, and reducing taxes so there is less potential waste from the very start of the digestive process.
The campaign for governor of Virginia in 1997 turned on a "No Car Tax" slogan. The Republican candidate and ultimate winner, Jim Gilmore, claimed that the state could eliminate that tax without cutting essential services. By the end of his term, there were serious splits in his Republican party over the budget cuts required to maintain the tax reduction, and the Democratic candidate in 2001 won election largely as a result of the intra-party dispute.
In 1998, Virginia collected $10.5 billion in taxes, an average of $1,552 for each person in the state. The state was 36th in the nation in the per capita tax burden that year. Connecticut earned the dubious #1 ranking, with $2,869 in taxes per capita. Virginia's taxes were just 6% of average personal income, 43rd among the states.2
In 2011, the Joint Legislative Audit and Review Commission (JLARC) identified the tax credits that reduced state revenues by $12.5 billion, when the budget was only $14.3 million. The "loopholes" that reduced tax revenue the most were:3
- sales tax exemption on prescription and nonprescription drugs
- partial sales tax exemption on food: $527 million
- income tax subtraction for federal Social Security benefits
- sales tax exemptions for some 2,000 nonprofit organizations
- land preservation income tax credit: $100 million
Source: Fairfax County Public Schools, https://youtu.be/wEoZG9D4FOU?si=LS-l-Ma2ppcxD-EC