Calculating the Cost of Eliminating Taxes in the Poorest Parts of Virginia

Jul 13, 2017

Credit MBandman / Creative Commons

One lawmaker from the Southwest corner of Virginia is pushing a plan to create tax breaks in some of the poorest parts of the state. But as Michael Pope reports, implementing that plan would blast a giant hole in the budget.

Republican Delegate Will Morefield of Tazewell wants to eliminate the personal income tax and the corporate income tax in some of the poorest parts of the state. But Laura Goren at the Commonwealth Institute says that might not be the best way to help.

“Bringing economic development to struggling areas of the state is certainly an important goal. Unfortunately tax cut proposals are not the most effective way to do it. Struggling areas need fundamentals like better infrastructure and better schools.”

Better infrastructure and better schools cost money though, and Goren estimates eliminating the personal income tax for the 33 jurisdictions that have a poverty rate of more than 20 percent would cost about one billion dollars — that’s not even counting the hit to corporate income tax revenue. Delegate Morefield says he might end up limiting the proposal to the 15 jurisdictions that have seen the highest population decline in recent years, which Goren estimates would cost about $1.5 million in lost personal income tax revenue. But Hamilton Lombard at the Weldon Cooper Center for Public Service says population decline is probably not a good metric.

“If you’re going to focus on population decline, you’re going to start throwing in places like Bath or Rappahannock, which are not necessarily poor counties but they have a fair amount of declined and that’s more to do with their age structure.”

In a written statement, Morefield says the poorest parts of Virginia “require more than just the status quo for economic development,” and he’s urging his colleagues win the General Assembly to work toward a “significant change in policy” to make that happen.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association