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Global Economist Richard Rahn Joins Eugene Delgaudio In Condemning Bob McDonnell Tax Increase

March 10, 2013
I have condemned the tax hike and asked the Governor to veto it. And I have written Sterling Americans asking to contact the Governor to condemn it.
You will note from the letter below that the Governor neither consulted nor informed a member of his Joint Advisory Board of Economists of the pending transportation plan.
Yet judging by the endorsements that accompanied the release of the plan, lobbyists, members of the business community and several labor unions apparently were informed of the plan, were asked for their opinion and endorsement and had advance copies of the Bill before it was available to the public.
As for seeking the views of independent professional economists, the governor instead sought (and bought?) the services of a for-profit economic consulting firm.
I have read about Mr. Rahn for many years and I will be posting several more reports on Mr. Rahn. He is a highly respected Chamber of Commerce Economist for many decades going back to the pre-Reagan era and is an outspoken propoent of the free market worldwide.

Richard W. Rahn, Ph.D.
Great Falls, VA 22066
March 1, 2013
The Honorable Robert F. McDonnell
Office of the Governor
Commonwealth of Virginia
1111 East Broad Street
Richmond, Virginia 23219
Dear Governor McDonnell:

I regretfully tender my resignation as a member of your Joint Advisory Board of Economists.

The reason for my resignation is that I strongly disagree with the new tax/transportation bill that you supported. Unfortunately, I was not asked for my advice (which I assume was also true of the other Joint Advisory Board members) before you and the legislature embarked on passing the largest increase in taxes in the history of Virginia. This action will do damage to the people of the Commonwealth of Virginia.
The business climate and economy in Virginia have been at or near the best in the nation because Virginia has maintained a relatively small state government. The new taxes and spending will grow the size of the Virginia government relative to state's GDP - a large and unnecessary step backwards.
The new sales taxes and user fees should have been offset, at the minimum, with a reduction in the state income tax. As you know, Virginia relies more heavily on the income tax than most other states, and it is perhaps the most destructive tax. With the new increase in the marginal tax rate at the federal level, the combination of the Virginia and federal income tax at the top rates is well above the revenue maximizing tax rate.
A number of other Republican governors are supporting major rate cuts in their state income taxes, and in several cases proposing to totally eliminate the state income tax. Virginia should be doing the same. I am fully aware of the cost of the increasing federal mandates, particularly Medicare, on the Virginia budget. However, again other states are finding ways to deal with it without increasing taxes.
Virginia has been innovative in the past for bringing more private sector funding for transportation infrastructure. These programs should be greatly expanded, as should programs to privatize parts of many other functions now performed by the State, which could be better done, in whole or in part, by the private sector. More innovative thinking would enable Virginia to reduce tax burdens (again particularly the income tax) while at the same time giving the citizens a higher level of service.
I am prepared to volunteer time to assist in a serious effort to reform the Virginia tax structure - which is badly needed.
My resignation should not be taken as anything more than a policy disagreement over the tax issue, for I have a very high regard for the professionals in the Virginia state government, including the Department of Taxation and, in particular, the director and chief economist of Revenue Forecasting, John R. Layman. Also, I do recognize and applaud the many positive things your administration and the legislature have done to enhance the well being of the citizens of the Commonwealth of Virginia. .
Richard W. Rahn
CC: Janet Vestal Kelly, Secretary of the Commonwealth, Commonwealth of Virginia
Richard Brown, Secretary of Finance, Commonwealth of Virginia
John R. Layman, Director and Chief Economist, Revenue Forecasting, Virginia
Department of Taxation

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