Union Executives Have More Sway than Employees or Voters

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Local government leaders are negotiating with union executives who have not been officially recognized by public employees they claim to represent.

Counties in northern Virginia are taking steps to allow public sector collective bargaining. But they are doing it with the support of union executives – not a groundswell of voter or public employee support.

On July 16 the Arlington County Board of Supervisors gave government unions the ability to have a monopoly on representing public employees by passing an ordinance allowing for collective bargaining. Similarly, Loudoun County on July 20 voted to have county staff draft an ordinance doing the same thing.

Staff and elected officials admitted they are working closely with unions. Arlington’s model ordinance discussion draft stated “the county manager, the county attorney and senior staff have continued to meet with representatives of employee associations to resolve as many issues as possible.”

Elected officials in both Arlington and Loudoun seem to assume unionization is a forgone conclusion, forgetting it is still up to the employees to decide if they want representation or not. The union leaders attending these closed-door negotiations have not been formally elected to speak for public employees.

Still, the American Federation of State, County and Municipal Employees bragged about how they helped take the City of Alexandria’s more focused ordinances to one which would give unions the ability to bargain over almost any subject not preempted by state law. And the union was even more blunt about their involvement with the Arlington ordinance: “AFSCME, the International Association of Fire Fighters and the Arlington Coalition of Police have been in discussions for many months with the county board since the board passed a resolution to adopt an ordinance. Like the City of Alexandria, Arlington County management initially sought a narrow ordinance only allowing public workers to negotiate for a specific set of issues.”

Loudoun now seems to be going down the same road. Before the public hearing, Loudoun supervisors will hold a private closed session in September so attorneys can address their questions. While this is understandable, there is a general feeling that any issues would be worked out before a public hearing on the bill – denying public employees and voters the chance to weigh in.

Phyllis J. Randall, chair of the Loudoun County Board of Supervisors, said the public hearing on Oct. 13 “is just a required thing as we go through this process. But what should be said is if the closed session is going to be on September 21 there will be an ordinance in its fullness before that closed session, before that package goes out the Thursday before.”

Unions have been spending more time working with politicians than actually telling public employees why they should represent them. As Randall acknowledged, unions are not doing a good job communicating to their potential members. While acknowledging a strong showing in the firefighters’ union and an online effort, she scolded the unions, saying despite a vote from the board indicating unions should hold membership information drives, “that hasn’t really happened.” She singled out The Service Employees International Union specifically for not doing more to communicate to employees. 

Supporters of the ordinance have hurled insulting rhetoric at their opposition. Loudoun Supervisor Koran T. Saines dismissed opponents as “outside agitators bringing these comments to the board.” To her credit, Randall pushed back on some of these inflammatory remarks.

Still, politicians supporting these ordinances are jumping the gun – bypassing the employee trigger in the state law,which allows public employees to petition a locality to vote on collective bargaining. While the law does give the power to local politicians to allow bargaining on their own, it is telling that they are not waiting for a demand from employees themselves calling for unions to come in and represent them. 

It should be noted that Arlington County and the City of Alexandria are the only local governments in Virginia that have passed laws allowing government unions to bargain since the state gave localities this power by enacting a state law that went into effect on May 1, 2021. 

While Arlington County and the City of Alexandria have passed these laws, it does not mean unions will automatically gain a monopoly. All workers in Virginia, public and private, are protected by the commonwealth’s secret ballot protection law, which gives them the right to a private vote on whether they want a union to represent them.

Thankfully public employees in Virginia are protected by the secret ballot. And even though politicians and unions are enacting laws which allow for collective bargaining, public employees will get the final say. Still, it is clear who is really pushing the effort for bargaining in the commonwealth, and it is not the average public employee. 

This commentary originally appeared July 31 on the VirginiaWorks blog.  

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Virginia Should Not Tax Income If Washington Doesn’t

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In 1972, a Virginia taxpayer needed a taxable income of $12,000 before the state’s maximum income tax rate kicked in.  Adjusted for inflation, that threshold should be $78,000 today.

There has been one adjustment since, to $17,000 in income before the maximum rate is now applied.  Adjusting that for inflation since 1987, when last amended, that should now be $40,000.  In Virginia today, even a lower middle income couple can paying the same maximum tax rate as the richest Virginians on parts of their income.

That is an illustration of the impact of inflation over time on Virginia’s tax code.  It is a built-in bonanza for the government, effectively raising taxes constantly as more and more income is pushed up over those frozen breakpoints.  With inflation about to kick in again, the Thomas Jefferson Institute for Public Policy continues to recommend that all elements of our tax code be adjusted annually for inflation.  That is already done at the federal level.

Step two of our plan, which actually represents a massive cut in income tax for Virginia citizens and unincorporated Virginia businesses, involves the standard deduction.  Virginia is now benefitting from another sneaky tax increase it implemented in 2019 by failing to make a serious change in the state’s standard deduction when it had the chance.

In 2017 Congress raised the federal standard deduction above $24,000 for a couple, which meant far more Virginians switched to the standard deduction on their federal taxes.  If you use the standard deduction on your federal taxes, you must do the same on your state taxes.  Millions of Virginians who used to itemize deductions began to use Virginia’s penurious (cheapskate) standard of $9,000 for a couple.

That one fact is the single biggest explanation for Virginia’s pending $2.6 billion surplus, even larger than previously expected.  Correcting the problem is easy:  Simply raise Virginia’s standard deduction, perhaps in phases, eventually equaling the federal amount.  Once you get there, the companion decision to index for inflation will keep Virginia in line with the federal amount.

The fiscal impact of suddenly going to the full $24,000 standard deduction for a couple would be major, perhaps in excess of the pending surplus funds.  A 2019 bill introduced in the state Senate produced an estimate of $1.25 billion in lower taxes in the first year, and about $1.8 billion after six years.  The General Assembly that year did increase the standard deduction for a joint return from $6,000 to $9,000, so the impact of going further would be less.

For the 2018 tax year, about 3.25 million individual or joint returns were filed using the standard deduction. Each additional $1,000 in standard deduction per return would produce an aggregate tax cut of at most $186 million.  For argument’s sake, assume 40 percent of those are joint returns and an additional $1,000 in standard deduction per person might cost the state (and save the taxpayers) $260 million.  Again, compare that to the pending $2.6 billion surplus.

To estimate the revenue loss (from our point of view “tax cut”) produced by indexing the tax code to inflation would require an estimate of future inflation.  It actually produces no revenue loss, but merely slows the growth in future taxes.  At one or two percent per year, the state can absorb it easily.  If we do reach 1970s-level inflation again, the change will be substantial.

But where the people who spend tax money see a revenue loss, the rest of us are correct in seeing lower taxes, putting more money into consumer or business-owner hands, even more important when their own costs are spiking.

Ending Virginia’s income tax entirely, either for individuals or also for corporations, is challenging because that really could blow a hole in Virginia’s basic budget.  Another tax increase somewhere else may be needed to compensate.  Politically, ending the income tax on the wealthy and funding it with a broader tax hike on everybody would not fly.

Using the $2.6 billion surplus we now see and the likely revenue growth the next forecasts will provide, both of the proposals discussed above could be implemented starting in Tax Year 2022 without cutting the budget.  The standard deduction increase could easily be phased in, as other state’s have done with income tax changes.  Indexing would start slowly and build.

If a new and indexed standard deduction eventually removes $10,000 from a family’s taxable income, that saves them up to $575 per year.  If Virginia could (within five or six years) reach the federal level of $24,000, the savings climbs to $862.50.  This would benefit individuals with income either from salary or wages or from an unincorporated business. It does not cut corporate taxes.

One argument against using the consumer price index to adjust the tax code in the past has been that other key economic measures were not adjusted in that manner by the state.  But the 2020 General Assembly blew that precedent to smithereens by applying automatic inflation hikes to both the state’s gas tax and its minimum wage law.  Now indexing should be applied to help the taxpayer, not just the tax collector.

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The PRO Act would take away Choice from Virginia’s Workers

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A bill under active consideration in Congress would allow unions to get Virginia workers fired for not paying union fees. The Protecting the Right to Organize Act, among many other things would end right-to-work laws in Virginia and in 26 other states.

According to a recent report by the Institute for the American Worker, 89,000 Virginia workers are unionized and currently protected if they change their minds by our state’s right-to-work law.   Those that have chosen not to join a union would be forced to pay union fees if the PRO Act passes. Those that are already members would lose the ability to choose to opt-out and stop paying union fees if they feel they are not getting good representation.

Another 2,971,327 Virginians could be forced to pay union fees if unions organize their workplace and the PRO Act kills right-to-work.

Union dues in Virginia average $544 per year with some unions charging over $1,000, not insignificant sums for middle- and lower-income families.

Right-to-work laws ensure that private sector workers unionized under the federal National Labor Relations Act (NLRA) are given a choice to join and pay a union or not. Without right-to-work, a union can tell an employer they have unionized that one of their employees is not paying union fees and cannot work there anymore.

Virginia was one of the first states to pass right-to-work and since worker freedom was enacted in the 1940s has enjoyed bipartisan support from both Republicans and Democrats.

Right-to-work is popular in Virginia. A recent survey from the bipartisan government affairs and research firm Forbes Tate Partners shows that 72 percent of Virginian voters are concerned that the law will be repealed and 65 percent supporting worker freedom.

In addition to giving workers the freedom to choose whether to support a union or not, right-to-work states enjoy higher personal income growth, lower unemployment and more jobs. Some union leaders even say that right-to-work helps them.

In 2014 Gary Casteel, who would eventually be the Secretary Treasurer of the United Auto Workers, remarked that  right-to-work is good for union organizing  because “[y]ou don’t have to belong if you don’t want to. So if I go to an organizing drive, I can tell these workers, ‘If you don’t like this arrangement, you don’t have to belong,’ versus, ‘If we get 50 percent of you, then all of you have to belong, whether you like to or not.’” 

It also means that workers get better representation because unions need to earn union dues and cannot take their members for granted.

Sen. Mark Warner has known these facts throughout his career and it may be why he has not come out in support of the PRO Act.

Even before being elected to the Senate then candidate Warner noted his support for Virginia’s right-to-work law. Clairvoyantly he also opposed federalizing the issue as would be done in PRO Act. In a 1996 debate against then Sen. John Warner Mark Warner pledged “I strongly, strongly support Virginia right-to-work laws but I don’t think we ought to federalize them.”

Another of the PRO Act’s many harmful provisions is that it would take away opportunities for independent workers to work for themselves and box them into a traditional employer/ employee model. This is another reason why Sen. Warner is urging caution on the PRO Act stating “My fear is that parts of the Pro Act try to fit all work into kind of a 20th century, classic W-2 employment status.”

This idea was already implemented in California with disastrous results. The California law was so bad that even the bill’s sponsor introduced and passed legislation limiting it. California voters then went to the ballot to further water down the law. Unfortunately, no such protections exist in the current version of the PRO Act.

Warner is standing strong to protect workers and entrepreneurs and should be applauded for not supporting the PRO Act even as unions use both pressure and weekly cakes to try to win him over.

Worker freedom is right for Virginia and the PRO Act would harm both workers by removing their choice to support a union or not and the state itself by taking away jobs and opportunity.

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Digging Beyond the #1 Ranking

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Virginia ranks #1 in the  “Top States for Business 2021” ranking produced by the business network CNBC, but it is important to dig into the ten measurement categories. They are not weighted evenly.  Changing the former “Qualify of Life” measure to “Life, Health and Inclusion,” and adding more points to that category, sealed the deal for Virginia’s latest recognition at the top of that chart.

Virginia’s Cost of Living score remains abysmal, number 32 among the 50 states.  Cost of Doing Business, the category with the most weight, had Virginia right in the middle of the pack at number 26.  The other overweight category is Infrastructure, and again Virginia had a middling rank at number 24.

Where Virginia’s total score shot past the other top states was in the revised life, health, and inclusion score.  At number eleven, it was way ahead of the number two through number five states, North Carolina (ranked 37 in that area), Utah (27), Texas (49) and Tennessee (46).

Virginia’s best rankings, and these have buoyed us all through the history of this report, were Education (number 2) and Workforce (number 3).

Governor Ralph Northam will take and enjoy the victory lap that comes with this recognition, the fifth time Virginia has topped the list in the 14 times it has been published.  Fellow Democrat and former Governor Terry McAuliffe – now seeking another term — will try to share the spotlight, although his term produced drought years with Virginia always out of CNBC’s top five and twice out of the top ten.

Northam’s happiness is doubled by the fact that the last ranking, 2019, also had Virginia at the top.  In the intervening two years, Democratic legislative control had dramatically reshaped the regulatory, legal and tax climate in the state.  That’s why the Business Friendliness score dropped from third in 2019 to number eleven in 2021 (probably still too high…)  Yet here we are still on top of the heap.

What went wrong with North Carolina, which scored better than Virginia in Cost of Doing Business, Infrastructure, Cost of Living, Business Friendliness, and other categories?  Read this from CNBC’s online story about Virginia and the runners up:

“But as one of only five states with no statewide public accommodation law to protect nondisabled residents against discrimination according to the National Conference of State Legislatures, North Carolina falls short on Life, Health and Inclusion (No. 37), potentially enough to keep the top spot out of reach.”

Check the linked NCSL listing of anti-discrimination laws, and you see two other states with a goose egg, Texas and Georgia, who have won this CNBC ranking in past years.  Tennessee also checked far fewer of those NCSL tracking boxes than did Virginia, which missed only one out of eleven.

One thing our General Assembly has done in the past two years is pass bills against various forms of alleged discrimination, with new state enforcement teams at the ready and serious fines and damages to encourage private legal actions.  If that is what America’s business leaders want, Virginia under Northam has provided it.  Based on its video presentation, CNBC was also impressed by the recent Confederate statue removals.

In a Tuesday LinkedIn post, Richmond economist Fletcher Mangum brought up the economic concept of “revealed preferences” (actions speak louder than words), and when you look at actual data on the growth of the number of jobs, Virginia is far from number one and is barely in the top 20.

Mangum writes: “VA ranked 19th among the states for employment growth in 2019-20 and 22nd in 2018-19. If we take a longer view, VA ranked 17th among the states in both 2015-20 and 2014-19. In short, the revealed preference of actual businesses seems significantly at odds with CNBC’s rankings.”

Among all the various rankings, the CNBC version has always carried great weight and when good has been touted by candidates in both parties.  Other outlets have different results, and Chris Saxman at Virginia FREE has pointed to Chief Executive magazine’s 2021 report, based on a poll of people holding those jobs. They placed Virginia outside of the top ten.

While the Northam term CNBC scores have exceeded McAuliffe’s, his campaign message is already that he will continue down the same paths as Northam’s.  Expect Republican candidate Glenn Youngkin to focus on the less-complimentary aspects of the CNBC report seeking to overcome the “we’re number one” mantra.

But it is a chant that will be taken up and magnified by business boosters, such as the Chamber of Commerce president gloating in this Virginia Business report on the announcement.  Expect to see his quote cited again in the campaign.

If the various failed elements of the Democrats’ tax, regulatory and employee rights agenda (such as right to work repeal, a transportation carbon tax and state mandates for paid leave) come roaring back in January, CNBC’s ranking will be their number one exhibit. The 2020 and 2021 changes did no harm, they will claim, and these ideas will also be applauded on Wall Street.

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Time to Cut Taxes

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If Virginia ended the fiscal year June 30 with a general fund cash surplus of $2 billion, almost 10 percent of its annual budget, that means taxes are too high. Period. The debate for the 2021 political season should be how to cut taxes, and how much.

The $2 billion projection surfaced in recent legislative meetings and departing Secretary of Finance Aubrey Layne did not dispute it.  He and his staff have the best handle on state tax collections as they come in, and probably know the final amount already.  It might not be announced until August.

The $2 billion represents tax collections beyond the initial estimates and is only part of the coming surplus.  The other piece is cash not spent in the budget, and there are always programs that do not use 100 percent of their assigned funding.

The $2 billion or larger general fund surplus should not be confused with the flood of federal funding justified by COVID which is washing across state and local governments and the private economy.  The General Assembly will be back in Richmond next month with billions of COVID-related dollars to allocate.  The fate of the general fund surplus will be decided by the regular General Assembly session which begins in January.

That means there is time – and indeed a duty – to ask all the men and women running for the General Assembly and the two men running for Governor what they intend to do with the unexpected bonus cash.  Will they use it to continue to grow government or can taxes be adjusted down to fit government as it exists?

Because the truth is, this rush of extra money being pulled away from working families and businesses is not in the least unexpected.  While former Governor Mark Warner is remembered for the major tax bill he negotiated and signed more than a decade ago, that was a mere shadow of the tax increases imposed under Governor Ralph Northam.  The difference is Northam’s have been adopted in pieces, over several years, and the state reaped the greatest tax harvest through inaction.

When the final numbers are in, it is likely the core general fund taxes will have grown by more than one third under Northam, while inflation during the same four-year period was about 10 percent.

The bulk of the higher taxes Virginians are paying are income taxes, both on individuals and corporations.  The increase can be traced to 2019 General Assembly’s bipartisan decision to capture and keep most of the windfall revenue produced by President Donald Trump’s 2017 Tax Cuts and Jobs Act.

In a nutshell, Congress in that bill expanded the amount of income subject to tax but cut tax rates deeply.  The Virginia General Assembly agreed with all the expansions of income subject to tax and then refused to cut rates even a little bit.  Legislators provided a one-time election year rebate, which arrived just before Election Day (surprise, surprise) and made a modest adjustment in the standard deduction.

The General Assembly understood it was raising taxes.  Its own published analyses showed the long term result would be a bonanza of higher taxes for it to spend, which has now appeared.  The opportunity remains to do what should have been done in 2019 and end the income tax bonanza that produced most of the $2 billion surplus.

Step one is to continue to increase the state’s standard deduction.  The gap between the state’s standard deduction ($9,000 per couple) and the federal ($25,000 per couple) is the problem. Take the large federal standard deduction, and you must accept the small state one.  Reducing that gap by raising the state’s standard deduction will relieve Virginians of income tax on thousands of dollars.

Step two is to index the state’s tax brackets and deductions to inflation, all the more important now that federal deficit spending is about to spark another round of 1970s-level inflation.  Virginia imposes the maximum income tax rate starting on $17,000, which hasn’t changed since the 1970s.  The opportunity is here to end the annual creeping tax hike created by inflation.

The immediate push-back will be that the state cannot “afford” to make such substantial reductions in its future revenues.  The surplus itself proves that major reductions in revenue will have zero impact on state spending, so the real question is whether the surpluses represent permanent growth, and how much tax reform is possible.

The revenue forecast to be done later this year will explore that, but a safe prediction is:  Yes, the tax bonanza produced under Northam will be sustained.   If nothing else, the economic sugar high produced by massive federal stimulus spending in Virginia will continue for several years.

Voters, silence implies consent.

This commentary originally appeared in the July 6, 2021 edition of the Richmond Times-Dispatch.  Stephen D. Haner is Senior Fellow for the Thomas Jefferson Institute for Public Policy.  He can be reached at steve@thomasjeffersoninst.org.

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