Activists throughout the country want to ban the use of natural gas, even in homes.

Posted on March 3, 2022 by Jefferson Policy Journal
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Read how they’ve already started this effort in Richmond by visiting: https://jeffersonpolicyjournal.com/richmond-city-may-cancel-gas-service-for-its-citizens-henrico-and-chesterfield

This would cost homeowners $26,000 to retrofit to electric. Legislation in Virginia would create and protect a right to use natural gas.

However, the Senate version of this bill would prohibit banning natural gas for businesses … but would still allow local governments to ban natural gas for consumers – that’s you!
Tell your elected Delegate and Senator to support protecting natural gas by voting to protect consumers – not just businesses! Vote for the House Version of HB1257! Go to https://consumerenergyalliance.org/stop-higher-energy-bills-virginia/ 

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Doubling Standard Deduction is Middle Class Tax Reform

Posted on February 24, 2022 by Stephen D. Haner
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The argument now dividing the General Assembly on partisan lines is not whether to cut the state income tax, but for whom. The House of Delegates goes big with a broad tax cut that brings Virginia into line with other states, but the Senate only wants small changes aimed at smaller groups of taxpayers.

More than 80 percent of the 4.1 million state tax returns filed in Virginia take the standard deduction, currently set at $9,000 for a married couple.  In general, the 3.4 million returns represent the middle and working class, with the poorest Virginians not filing any tax return and many of the wealthiest using itemized deductions.

Increasing the standard deduction by 100%, to $18,000 for that married couple, is a benefit aimed at that large group in the middle, which pays the vast majority of income taxes. They are at the center of the legislative struggle now underway between the Virginia House of Delegates, which supports the increase, and the Virginia Senate, which does not. The controlling majority in the House is Republican and in the Senate it is Democratic.

The Virginia Senate has instead approved a state income tax reduction that applies only to the lowest and lower middle income groups, those eligible for something called the Earned Income Tax Credit.  It has also endorsed a new tax subtraction for military retiree pay, passing in both chambers.

Two years ago they jointly projected $46.4 billion in state General Fund revenue for the two year budget.  After accounting for the doubled standard deduction and several other tax changes, the House is still projecting a 26% increase for the next two years, to $58.3 billion.  The Senate, offering fewer changes to the tax rules, expects a 33% increase, to $61.7 billion.

About two-thirds of the $3.4 billion revenue gap between House and Senate is the standard deduction change.

The Senate considers the House’s 26% increase in revenue and spending not adequate to the state’s needs.  Activists inside and outside the legislature are busy painting the House’s proposal, despite its growth of $11.9 billion, as a series of cuts, reductions, “defunding” even.

A university poll getting widespread attention this week from a news media hostile to Youngkin implied that the House budget, 26% larger than two years ago, leaves education, public safety and social services “underfunded.”

The tax policy differences will need to be reconciled in about two weeks, when the Assembly is set to end.  The playing field will be the conference committee negotiations over the budget, and perhaps over the House bill that raises the standard deduction.  The Senate committee changed the Earned Income Tax Credit with a bill embedded in the budget document.

The increased standard deduction was a campaign promise by Governor Glenn Youngkin but is not a new idea. It has been adjusted up several times over the years.  Most states that have personal income taxes allow a standard deduction higher than Virginia’s, and the federal amount is $25,100 for that same married couple.

Allowing those 4 million households to exclude another $9,000 from tax would save the vast majority of taxpaying couples $517.50.  Those that have tax withheld from pay would see that go down.  Pegging the future standard deduction to inflation for automatic increases would be better still but is not on the table.

Advocates for low income citizens are correct that if a worker pays no income tax because they fall below the filing thresholds or EITC eliminates their tax liability, then increasing the standard deduction is of no value to them.  That is likely a few hundred thousand Virginia households.  Make the EITC into a refundable program, meaning any credit not used to cancel taxes becomes a payment, and then those folks come out ahead.

As an example, a married couple with $30,000 in income owes no income tax because of the EITC. Make that refundable and they also get a check from the state for $339.  (The federal EITC is refundable, too.) Couples with children earning over $50,000 would see an EITC refund payment, although as income rises, the amount shrinks toward zero.

Here’s something most don’t mention.  The two approaches are not mutually exclusive.  The General Assembly could do both, double the standard deduction and turn the EITC into a refundable benefit.  The EITC change only reduces revenues about $200 million more per year.  If that is how to get to yes on the standard deduction, it should be considered.

Both the Senate and the House have approved one-time modest cash rebates to individuals who paid income tax for last year.  Those are not lasting tax changes, also provide no benefit to those who paid no tax, and also go to richer taxpayers who used itemized deductions.  Reconsidering that might be another path to yes.

Something is going to have to give to reach a compromise. When the smoke clears the standard deduction increase is the most important element, the income tax provision of broadest benefit, and should be adopted.

Posted in Government Reform, State Government, Taxes | 1 Comment

Repeal of VCEA, RGGI, EV Mandates Pass House, Face Hostile Senate

Posted on February 17, 2022 by Stephen D. Haner
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Virginia’s House of Delegates Republicans have passed a series of bills retreating from Virginia’s rush toward a fossil-fuel free future, but they were party-line votes and Democrats in the Virginia Senate, who hold a majority on that side, may promptly kill them all.

Two bills aimed at repealing or amending the 2020 Virginia Clean Economy Act (VCEA) were also opposed in testimony by Virginia’s major electric utilities, who are heavily investing in the mandated renewable energy assets, including a planned 179 turbine offshore wind facility planned by Dominion Energy Virginia.  Various environmental groups were unified and vocal in their opposition to the bills.

But the utility opposition expressed in the House Committee on Commerce and Energy did not stop the bills.  On the more comprehensive proposal two senior Republicans did choose not to vote in committee.  Once House Bill 118 got to the full House, however, both cast aye votes.  One of them had voted in favor of the VCEA two years ago, the only Republican delegate to do so.

On the Senate side, the utility opposition is likely to stiffen.  The committee likely to hear all or most of the bills is split between 12 Democrats and 3 Republicans, and two of those Republicans have already voted to kill (“pass by indefinitely”) another measure written to amend the VCEA and give the State Corporation Commission authority to reject the renewable projects.

There was very little debate on the House side and no legislative maneuvering as the Republicans went on record dismantling the net-zero emissions vision that Democrats imposed when they had control in 2020 and 2021.

None of the bills have received any public discussion, let alone support, from Governor Glenn Youngkin (R) or members of his administration.  The only element of his Day One agenda touched upon by these bills is ending Virginia’s participation in the Regional Greenhouse Gas Initiative.  There are other paths besides legislation to drop out of RGGI and end the related carbon tax.

Youngkin would likely be happy to sign House Bill 1301, a direct repeal of RGGI.  The same goal is accomplished in House Bill 118, but that legislation goes much farther and repeals all of VCEA as well.  Its passage was highlighted on the Republican House Caucus list of “promises kept” issued on Tuesday..

The argument against House Bill 118 on the floor fell to Delegate Richard “Rip” Sullivan, D-Arlington, who claimed its passage and the coming solar and wind dependence are major economic assets to the Commonwealth. “Jobs and businesses are pouring into Virginia,” he said. Certainly jobs for installers will explode, during installation, and there is one turbine blade assembly plant planned for Hampton Roads to support the offshore wind construction.

Drawing far less attention on the floor was a bill that passed the day before, House Bill 73, which actually received one vote from a Democrat. It leaves most of the VCEA intact but removes the specific mandates of how much wind and solar must be built, and by when, and restores the State Corporation Commission authority to rule on need, reasonableness and prudence.  Those standard tests were overridden by the VCEA as passed.

Many Democrats have at least given lip service to restoring the SCC’s independent review to protect consumers but missed this chance to put that position into action.

Two House Democrats are on record voting for House Bill 1257, which establishes in law a right to use natural gas if it is available. It was filed in response to a move by the City of Richmond, copying a national trend, threatening to close down its municipally-run gas utility.  Under the pending bill Richmond would have to seek a buyer for the operation instead.

But the bill is broader than that, prohibiting local ordinances against new gas connections and reaching to non-utility uses of natural gas.  Eliminating natural gas from electricity generation is only part of the net-zero vision, which extends to an outright ban on the energy source.  Nay votes on the bill can and will be portrayed as votes to kill natural gas period.

Finally, the House Republicans also voted as a block to reverse a recent regulation adopted by the Air Pollution Control Board and signed by previous Governor Ralph Northam (D.) Dubbed by supporters as the Clean Car Rule, it would tie Virginia’s market for new vehicles to rules promulgated by the California Air Resources Board.

House Bill 1267 (no Democrat support for this one) would allow the air board to reconsider such a regulation.  But this time it would have to do a full regulatory review and allow public comment, short-circuited in earlier legislation.  And it would move the timeline for Virginia’s alignment to the California rules to no earlier than 2029.  California is planning to ban the sale of any new internal combustion or hybrid cars and small trucks by 2035.  Virginia’s auto dealers lobby cheered the regulation and is opposing this bill.

Democrats, confident public opinion is on their side, are dug in, although polling data suggests voters stand on the side of the GOP’s legislators.  The State Senate majority is likely to confirm its desire to prohibit new gasoline or diesel cars, prohibit natural gas stoves and furnaces, impose ever higher carbon taxes on electricity and then close down all fossil fuel generation. The deadlines are always way past the next election or even the end of their careers.

Posted in Economy, Energy, Environment, State Government, Taxes, Transportation | Comments Off on Repeal of VCEA, RGGI, EV Mandates Pass House, Face Hostile Senate

House Would Return Surpluses, Senate Ready to Spend More

Posted on February 14, 2022 by Stephen D. Haner
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Virginia government is flooded with cash, tax revenues far in excess of what is needed to maintain its current level of services and a fair reserve.  Key votes have now been taken and the House of Delegates is poised to return much of the excess money back to taxpayers.  The Senate of Virginia wants to keep the money and continue growing government ever larger.

Yet another monthly financial update showing surging tax receipts was released Friday.

Governor Glenn Youngkin (R) campaigned on and has introduced a series of tax reductions, most (but not all) of which will likely receive approval by the full House by today or tomorrow.  Some of them (but not all) have received bipartisan support during their consideration in committee.

But the Senate Finance and Appropriations Committee, meeting late Thursday while an earlier Jefferson Policy Journal update on this topic was being written, is sticking with the minor tax cuts/more spending approach proposed by outgoing Governor Ralph Northam (D).  Some committee Republicans joined in voting against Youngkin’s proposals.

That means that when the two bodies consider their amendments to the state budget week after next, the Senate version will contain billions of dollars in additional spending and its members will assert that any failure to approve every dollar is harmful to the Commonwealth.  They will claim that the House budget, bound to also include record spending, is unfair compared to theirs.

The amazing financial surpluses already seen last year and expected for the next two result from the economic juicing of consumer spending by COVID-related relief programs, and the (usually unmentioned) long list of tax increases imposed under Northam.  This unique opportunity to cut taxes, improve cash reserves and still grow the state budget will not be permanent.

Where are the key points of difference between the chambers?  The House of Delegates is poised to double the standard deduction most Virginia taxpayers claim on their income tax, from $9,000 to $18,000 for a couple filing jointly.  That saves joint filers up to $518 per year and will reduce taxes about $2.1 billion in the next two years. It saves about $900 million per year after that.

The Senate, on the other hand, sent its version of the standard deduction bill to be studied, part of a promised comprehensive tax reform study.  Many of the same senators made the same promise just three years ago, claiming they would look at tax reform in response to the federal Tax Cuts and Jobs Act. It never happened.  Remember the Taxpayer Relief Fund? It got spent.

The Senate’s proposed budget to be revealed next weekend will likely spend that additional $2.1 billion on very popular items, supported by large interest groups willing to fight to keep it.  Forgotten will be the interest group called “taxpayers.”

It will be the same on the Governor’s proposal to remove the sales and use tax from the purchase of groceries and necessary personal hygiene products.  The sticking point there has been that the tax is also imposed and collected by local governments, dedicated to schools.  The House is poised to fully remove the 2.5% tax but replace the lost local revenue out of general sales tax pot.

The Senate is moving to repeal only the 1.5% state portion of the tax and would leave the local 1% tax in place.  It’s bill delays implementation until 2023.  The change gives the Senate budgeteers another $700 million to spend over the next two years, widening the gap with the coming House budget.

The third major point of difference involves Youngkin’s campaign pledge to suspend for one year part of the motor fuel tax increases imposed under Northam.  The House is about to pass a bill to accomplish that, which reduces transportation funding about $380 million over two years, with a lingering impact into future years.  The Senate committee simply killed that bill outright, no amendments, no study.

Any or all of those outcomes may change.  They are just the position of the parties at halftime, with the annual negotiations between the House and Senate following.  Assuming the General Assembly agrees on a compromise tax and budget package by the session deadline of March 12, Governor Youngkin gets one more chance to offer amendments at the reconvened session in April.

One proposal that continues to advance with unanimous bipartisan support creates a subtraction for military retiree pay, although it no longer would go into effect for this year.  Beginning in 2023, the subtraction is created at $20,000 and then grows to $40,000 in future years.

There have also been outright losses for the Governor, although they too are issues that could be revived later in negotiations.

The House Finance Committee had endorsed Youngkin’s promised tax credit for small businesses, basically a one-time exclusion for $250,000 in taxable income. But it was not on the list of tax proposals that emerged from House Appropriations late Friday to advance to the floor today.  The Senate committee had already voted to send it to that promised study commission.

That was something sought for small business taxpayers.  The other defeat involved mostly larger business taxpayers, those that received federal Payroll Protection Program grants for 2020 in excess of $100,000.  Youngkin sought to give them a retroactive deduction of up to $1 million but sought to do it in the annual bill creating conformity to federal tax code.  That bill needs to pass as an emergency measure with a four-fifths vote, meaning it would need Democratic votes.  It was getting none until the retroactive provision was dropped.

The 2019 General Assembly was another fleeting moment when real tax reform was possible, as the state saw a surge of revenue on the horizon created by conforming to the federal tax changes.  Instead legislators approved a one-time cash rebate, an election year sop, and a minor change in the standard deduction.  A repeat of that outcome remains very possible.

The Thomas Jefferson Institute has long advocated for doubling the standard deduction.  This year is the time to finally do it, but it won’t be done if legislators don’t hear from their constituents.  The time to hit the phones and emails is now.

Posted in Economy, State Government, Taxes | Tagged | 1 Comment

A Clean Energy Disaster Arrives By 2050

Posted on February 9, 2022 by Stephen D. Haner
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By 2050 Virginia’s transition to wind and solar power under the Virginia Clean Economy Act (VCEA) could add almost $200 a month on average to a residential electric bill.  Previous estimates of the consumer cost of dumping all fossil fuels from power generation have focused on the next ten years or so, but a new analysis looks beyond that to the actual deadline for the planned conversion.

Commercial and industrial customers would see comparable explosions in cost.  These projections are far higher than those prepared by our own State Corporation Commission for two reasons:  The SCC estimates do not cover the later years when the utilities must reach full compliance, and therefore do not include all the coming new investments into the late 2030s and 2040s.

The Center of the American Experiment in Minnesota, which has looked at similar proposals around the country, estimates that Virginia energy ratepayers of all classes will need to pay out an extra $203 billion over two and half decades, close to half of it the utility profit margin on the massive new solar, wind, battery and related transmission facilities.

The Virginia General Assembly is currently considering either repealing or amending the 2020 VCEA, which dictated that Virginia’s major electric utilities must eventually stop using coal, natural gas or other fuels that emit carbon dioxide.

For the periods covered by the SCC reports, the ACE report lines up closely on cost.  But its 2050 combination of assets includes far more solar panels and battery storage than anybody has talked about so far and adds 7,500 megawatts of land-based wind turbines, in addition to the coming offshore wind mandated in VCEA.  It assumes no more than the 5,200 megawatts of ocean wind turbines already included in VCEA, because of the high cost.

It predicts a total of 105,000 megawatts of generation and storage will be needed to reliably serve Virginia, about four times the current fleet.  The amount of steady and reliable generation not dependent on the weather will decline from 25,000 megawatts now to 8,000 by 2050.

The authors of this study are not utility engineers or expert accountants and were hired by a partisan group leading the fight to repeal the VCEA.  They rely on models to design a likely generation network that complies with VCEA, and estimate its costs based on current industry information in the public domain. The old rule applies:  All models are wrong, but some models are useful.   This is useful.

Their main point is one that has been made by others.  The VCEA will introduce such a huge dependence on wind and solar assets that are subject to weather interruptions that massive battery installations will be necessary to back them up. Those installations will sit idle most of the time with the meter running.  The authors have looked at performance data on existing wind and solar installations to predict how often and for how long that will happen.

“For example, based on hourly load forecast models, there are multiple 15+ hour time frames where the combined capacity of wind and solar – totaling nearly 64,000 MW in 2050 – produced at capacity factors below 10 percent. At times, the combined capacity factor hit zero.

“In one of these instances, wind and solar produced at capacity factors below 10 percent for an 18-hour stretch, which came within a 64-hour period where the average capacity factor of combined wind and solar capacity was 11.6 percent and the highest it reached was 29 percent.”

A 64-hour brown out? When your system depends on 51,000 megawatts of solar panels and 12,700 megawatts of wind turbines, calm and cloudy days are going to be a challenge.  The nuclear plants and hydro plants which will remain in 2050 will not be enough to pick up the slack, and battery discharges are of limited duration.  Since other states are also killing off their fossil fuel plants (and some are killing their nuclear) you cannot depend on imports to keep the lights on.

In this report, the cost of that battery backup is applied in estimating the levelized cost of energy for the new solar and wind.  It adds about $28 per megawatt hour to the cost of the offshore wind plans, $43 per megawatt hour to any onshore wind, and about $45 per megawatt hour for solar.  The utilities and environmental activists will violently resist including that calculation in the SCC cost analyses on new solar and wind projects.

But it should be there.  Intermittency needs to be assumed and priced in.  Batteries are not generators.

This will not work.  The VCEA-created system mandated in state law will be unreliable and incredibly expensive.  The utilities know this but won’t say it out loud.  The SCC experts know this but haven’t been asked to project to 2045 or 2050.  But both the utilities and the SCC are dancing around the truth, and even some Democrats may be waking up.

The ACE report seems to treat the Virginia electricity system as an organic whole, not focusing on the different companies and territories.  Most of these costs will be imposed on Dominion Energy Virginia customers, about 70 percent of Virginians, and regional price variations may grow.   The report also disregarded the huge tax incentives for renewable investments the utilities may reap, in recognition that those merely shift costs from ratepayers to taxpayers but do not reduce the real cost.

Democrats in the state Senate are expected to kill the repeal or reform bills pending.  That also just shifts something but doesn’t avoid it. It shifts from now to sometime in the future the point at which Virginians realize this is not going to work, they cannot afford it, and start work on something viable.

Posted in Government Reform | 2 Comments