JUST ANNOUNCED: Jason Cale Band will be playing our Best Of event! Grab your tickets now before they are gone!

'Phony math': Wagner calls for scrutiny on Gillespie tax cut promises

Travis Fain
Contact Reportertfain@dailypress.com
Gillespie tax cut promises built on "econometric analysis." @vafrankwagner calls baloney on "Washington math."

State Sen. Frank Wagner opened up with both barrels this week on fellow GOP gubernatorial hopeful Ed Gillespie's tax plan, saying Gillespie's pitch is based on "dishonest, phony math."

Pressed to show its math, the Gillespie campaign pointed to a think tank in the Boston suburbs and a computer model using "thousands of equations solved simultaneously" to look into the future of Virginia's economy. It predicts a boost in household wealth and, thus, higher impact for Gillespie's promised income tax cut.

"Quite frankly dishonest," Wagner said. "It's Washington math. Washington insider math."

Gillespie has made a 10 percent cut in Virginia's income tax rates the centerpiece of his campaign for governor. One of his central pitches is that, once phased in, this will save families nearly $1,300 a year.

Some campaign literature simply says "a family of four" will see these savings. Elsewhere the campaign promises this for "a typical family." Math from the Beacon Hill Institute, which Gillespie used to score his plan, says that family will need to make $135,000 a year.

This, Beacon Hill Director of Research Paul Bachman said, is what the average Virginia family can expect to make in 2021.

Virginia's median household income for 2015 was $65,015, according to the U.S. Census Bureau. A median, of course, is the the amount that falls right in the middle, should you build a column of numbers from largest to smallest.

Averages come from adding those figures and dividing by the number of entries. Average incomes are dragged up by the very rich, and basic math using the most recent U.S. Census numbers puts average household income in Virginia at about $93,500.

Bachman said his group's model looks at 21 industrial sectors, at government, at world markets, at investment levels and labor markets to build "a picture of the economy with all the different taxes and all the different variables."

Wagner, R-Virginia Beach, did much simpler math, figuring the difference in taxes paid at Virginia's current top rate of 5.75 percent versus the rate Gillespie has proposed, 5.15 percent. A little algebra says it would take $214,000 in adjusted gross income to save the $1,285 Gillespie promises.

"The average family does not make $215,000 in Virginia," Wagner said.

Doing the same calculations on $135,000 in income yields an annual tax savings of $810. Bachman said the rest of the predicted savings comes from "dynamic modeling" that predicts economic improvements, partly due to the tax cut itself.

"There's a boost to the economy, and so that creates some income," he said.

Jim Shepherd, an accountant and past chair of the Virginia Society of CPAs, said this modeling is "heavily biased" toward showing economic improvement from tax cuts.

"It's a theoretical assessment that doesn't have tremendous real world testing," he said.

What's more, Gillespie has proposed a potential end to BPOL and machinery and tools taxes that help pay for local government. Replacing that revenue would require tax changes elsewhere that could offset expected savings in the income tax, Shepherd said after reviewing the Gillespie plan.

Gillespie's response to Wagner's charges focused on the big picture, and spokeswoman Abbi Sigler contrasted the campaign's "responsible plan to cut taxes for all Virginians" with Wagner's proposal to increase the state's gasoline tax to fund more transportation projects.

"Senator Wagner has put forward a plan to raise taxes on hardworking Virginians and now has resorted to questioning an econometric analysis conducted by independent economists at the Beacon Hill Institute," Sigler said. "Ed's plan will provide much needed relief to Virginia families and create more than 53,000 full-time, private sector jobs in our Commonwealth."

Wagner, R-Virginia Beach, has called this plan irresponsible from the day it was announced, and this week he pointed to credit ratings agency Standard & Poor's recent decision to dial back its outlook on the state's financial future as partial proof that Virginia can't afford a tax cut. Wagner offers similar criticism for Prince William County Board of Supervisors Chairman Corey Stewart, who has proposed a tax cut larger than Gillespie's.

The three men face off in a June 13 Republican primary. Wagner and Stewart both lag Gillespie badly in public polling on this race, and Wagner is far behind in fundraising, bringing in less than $60,000 in the first three months of 2017, compared to Gillespie's nearly $1.9 million.

Wagner defends his campaign's viability though, and he was joined in a Monday press conference by retired state Sen. John Watkins, who until recently sat on the budget-writing Senate Finance Committee where Wagner remains member.

"We tend to be made a lot of promises from politicians," Watkins said. "We can't depend on the figures."

Current Senate Finance co-Chairman Emmett Hanger participated in this press conference by phone to show his support.

Gillespie's plan has backing from top leaders in both the House and Senate. Two of them, Speaker of the House William Howell and House Majority Leader Kirk Cox, the likely new speaker next year, offered continued support for the plan Monday, if not a robust endorsement of the math behind its promises.

"Speaker Howell and Leader Cox strongly support Ed Gillespie's responsible plan to cut income tax rates for all Virginians, putting $1,285 back into the pockets of a family of four," spokesman Chris West said in an email. "Different models and math may get you a different result, but any way you slice it Ed's plan puts more money back into the pockets of hardworking Virginians."

Senate Majority Leader Thomas K. "Tommy" Norment Jr. declined, through a spokesman, to comment on the matter. An effort to reach House Appropriations Chairman S. Chris Jones was not successful. Both men have backed Gillespie's tax plan.

Fain can be reached by phone at 757-525-1759.

Copyright © 2018, The Virginia Gazette
52°