Study says state could benefit by trimming tax breaks

RICHMOND - Virginia officials looking for a way to balance the recession-wracked budget could free up cash by delaying or junking some tax breaks, according to a study out Sunday morning.

The Commonwealth Institute, economic research arm of the liberal Virginia Interfaith Center, says the state currently loses $2.5 billion a year to tax cuts and credits, some of which may no longer be justified.

Michael Cassidy, director of the Commonwealth Institute, says Virginia should examine these breaks and determine whether they’re doing what they were designed to promote—be it job creation, the farm economy or coal sales.

The biggest tax-cut program is the car-tax rollback, costing about $950 million a year.

Other big-dollar tax breaks: $791 million in corporate and individual relief, $377 million in lower sales and use taxes and $140 million through repeal of the estate tax.

So far, departing Gov. Timothy M. Kaine has largely balanced the budget through spending cuts. State spending is down $6 billion since April 2007.

Because of the continuing downturn, there’s another hole in the budget; it’s estimated at $1.5 billion. The budget Kaine leaves Republican Gov.-elect Bob McDonnell must, by law, be balanced.

Cassidy says that with the prospects of even deeper cuts, Kaine, McDonnell and legislators might want to look at controls on what Cassidy calls the “hidden side of the budget”—tax breaks.

McDonnell, along with Democratic opponent R. Creigh Deeds, argued for greater tax relief to help jump-start the economy. Both favored, for example, tax credits for new jobs.

McDonnell, elected with nearly 60 percent of the vote in a low-turnout election, is ruling out new taxes. It’s possible he’d look on any delays in tax relief as the equivalent of a tax increase.