Democratic hopeful Tom Perriello rolled out a major tax reform plan Friday, calling for higher income taxes on the wealthy, targeted increases on large companies and a long list of other reforms.
The former one-term congressman now running for governor called for new tax credits to help the working poor and for a new sales tax on rounds of golf, while lifting the state sales tax on tampons and sanitary napkins.
He wants to save the Virginia retirement system money by simplifying its investment strategy, cut back on lottery advertisements and forbid elected officials from juicing their pensions by taking high-paying state jobs at the ends of their careers.
The basics are laid out in a lengthy post online, and the campaign said its increased revenue projection hovers around $1.1 billion. Perriello has called for an estimated $1 billion or so in new spending, including universal pre-K, free community college and a new family leave requirement for private sector businesses.
Such a tax increase would likely be a no-go with the GOP-controlled General Assembly, particularly since much of its leadership has backed a $1.3 billion tax cut plan from Ed Gillespie, the frontrunner in the GOP side of this governor's race.
Lt. Gov. Ralph Northam, who faces Perriello in the June 13 Democratic primary, has called for much more modest spending increases. He proposed at least a partial rollback this week in the state sales tax on groceries, but said details of that proposal and his other tax philosophies would come later.
Perriello's reforms start with a 1 percentage point increase in the state income tax rate for those making more than $500,000 a year. For those making more than $1 million the rate would increase 1.5 percentage points. The campaign said this would be gradual, but did not lay out a timetable.
Virignia has four income tax brackets now and the top one, charging 5.75 percent, starts at $17,001 a year. Perriello blasted this arrangement Friday, saying someone who makes $18,000 a year shouldn't pay the same rate as someone making $18 million. He also said his proposed increase would leave 99 percent of Virginians unaffected.
On the other side of the scale, Perriello proposed a new $500 refundable child care tax credit and said he wants to make the state's Earned Income Tax Credit refundable.
The EITC is available to the working poor, lowering or wiping out their state income tax burdens. Making it refundable would mean that, if the EITC dropped a person's income tax below zero, the government would cut them a check.
On the corporate side, Perriello said the state could generate more than $100 million a year by requiring combined reporting, instead of allowing multi-state companies to shift profits into lower-tax states and avoid taxes. He also called for a new floor for corporate taxes, saying this would ensure large companies don't game the system. Small businesses would be exempt, he said.
He also wants to reform the state's net operating loss carry back system, saying Virginia is in the minority of states allowing businesses to deduct losses on past returns to generate a new refund.
The Perriello plan includes some new sales taxes on services, but with the rich targeted. Applying the sales tax Virginia puts on goods to "high end services" would generate enough money to pay for two years community college or trade school for nearly all Virginians, the campaign said.
It gave only three examples of these services, though: limousine rides, golf courses and lobbying. A 2012 report from the General Assembly's auditing arm said charging sales taxes on golf courses and country clubs would raise some $21 million in 2015 dollars, and that taxis and limosines clocked in at about $9.3 million. It didn't give a figure for lobbying and consulting, but said fewer than 10 states charges sales taxes on those services.
To cover the estimate $350 million price tag the Perriello campaign has given for its community college proposal reforms, these service sales taxes likely would have to be broader.
The campaign said women make up the majority of low-wage earners, and thus would benefit more from the EITC and child care tax credits, as well as from boosting minimum wage to $15, something Perriello and Northam both support. But in arguing against "gender inequality in the tax code," Perriello also backed a proposal seen in a number of states in recent years: Stripping the sales tax from tampon and sanitary napkin sales.
This was proposed last year in Virginia and fiscal analysis said it would save taxpayers about $5 million a year.
In looking for savings, Perriello noted something that's caught Republican legislators' attention in recent years: The nearly $350 million a year the Virginia Retirement System pays outside investment managers. He called for a lower-fee investment strategy, potentially relying more on index funds.
He also blasted the habit Virginia politicians have of leaving low five-figure elected jobs for six-figure appointed ones in the twilight of their careers to boost their state pensions, which are calculated off the highest 3 years of salary. Perriello said he wants to end this practice, but did not give details.
He called for less lottery advertising and administrative costs, saying any savings would go to the education budget, and promised to look to the General Assembly's Joint Legislative Audit and Review Commission for other savings. JLARC analyzes state spending routinely but sees its recommendations enacted less frequently.
Perriello said he wants to identify $100 million in savings, though that effort may focus less on spending than it does tax credits the state offers now to various industries.
Fain can be reached by phone at 757-525-1759.