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Virginia Governor Kaine Proposes Income Tax Increase, First State Spending Cut

1 min readBy: Joseph Bishop-Henchman

Lame duck Virginia Governor Tim Kaine (D) leaves office in a few weeks, turning things over to Republican Bob McDonnell. This year’s $37.8 billion budget is a slight increase from last year’s $37.0 billion and up even from 2007’s $35 billion budget, but Kaine argues that a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increase is needed to keep up with proposals for spending growth.

(The Washington Post commends Kaine for “reducing budgets by $7 billion” but that seems to be a false assertion. Unless they mean Kaine proposed $13 billion in new spending but only did $6 billion in new spending, and therefore “reduced” spending by $7 billion.)

Yesterday, Kaine floated the idea of reducing $950 million in relief sent to local governments in return for their reducing the car tax, a lightning rod issue in Virginia politics. Today, Kaine suggests that would be coupled with raising income taxes by 1 percentage point and dedicating the money to local governments, beginning in 2011.

Kaine’s budget for 2011 would be $37.3 billion, a 1.3% reduction from this year, and for 2012 would be $37.8 billion, the same as this year. The budget numbers assume the state’s revenues rebound significantly in 2011 and 2012, although it’s unclear as to whether they account for the car tax/income tax change or not.

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About the Author

Joseph Bishop-Henchman

Joseph Bishop-Henchman

Executive Vice President

Joe Bishop-Henchman is Executive Vice President at the Tax Foundation, where he analyzes state tax trends, constitutional issues, and tax law developments. Joe has testified or presented to officials in 36 states, testified before Congress six times, and has written over 75 major studies on tax policy.