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Virginia-STAMP March 2-3, 2006 Richmond, Virginia Thomas Jefferson Institute for Public Policy - PowerPoint PPT Presentation


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Virginia-STAMP March 2-3, 2006 Richmond, Virginia Thomas Jefferson Institute for Public Policy. David G. Tuerck Alfonso Sanchez-Penalver Beacon Hill Institute. About the Beacon Hill Institute.

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Virginia-STAMP March 2-3, 2006 Richmond, Virginia Thomas Jefferson Institute for Public Policy

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Virginia-STAMP

March 2-3, 2006

Richmond, Virginia

Thomas Jefferson Institute for Public Policy

David G. Tuerck

Alfonso Sanchez-Penalver

Beacon Hill Institute


About the Beacon Hill Institute

  • Housed in the Department of Economics at Suffolk University in Boston, BHI specializes in the development of state-of-the-art economic and statistical models for policy analysis.The department offers degrees in Economics through the PhD.

  • BHI’s major capabilities include:

    • State Tax Analysis Modeling Program (STAMP)

    • Local Area Modeling Program (LAMP)

    • Education Assessment Model

    • State Competitiveness Report


Overview of VA-STAMP

  • STAMP is specified in terms of supply and demand for each factor of production and each commodity included in the model

  • STAMP is a CGE (computable general equilibrium) model – a computerized method of accounting for the economic effects of tax policy changes

  • Tax policy changes are shown to affect economic activity through their effects on the prices of outputs and on the factors of production

  • Government spending on infrastructure is modeled as exerting positive effects on production


What is a Computable General Equilibrium (CGE ) tax model?

• A formal description of the economic relationships among producers, households and government in a particular state and the rest of the world

• Computable: generates numeric solutions to concrete policy and tax changes, with the help of a computer

• General: takes all the important markets and flows into account

• Equilibrium: demand equals supply in every market


STAMP Analysis of2006 Tax Change Proposals in Virginia

  • Proposals Analyzed:

  • Governor

  • Senate

  • House


Governor’s Proposal

  • Increase motor vehicles sales tax from 3% to 5% and increase the minimum tax levied on the sale of a motor vehicle from $35 to $55

  • Increase motor vehicle insurance license tax from 2.5% to 4.5%

  • Convert Virginia’s registration fee into a weight-based registration system

  • Impose and collect fees on drivers who have accumulated more than eight net driver demerit points or have been convicted of reckless driving, driving on a suspended or revoked license, driving under the influence (DUI), or other misdemeanor

  • Reallocate $339 million for One-Time support to priority projects

  • Reallocation of existing Insurance Premiums totaling $579 million over four years


Governor’s Proposal:Projected Effects on Funds


Governor’s Proposal:Projected Effects on Employment


Governor’s Proposal:Projected Effects on Income


Senate Proposal

  • Increase motor vehicle registration fees

  • Increase motor vehicle sales and use tax by 0.75%, in increments of 0.25% over 3 years

  • Impose 5 % sales tax on motor fuels at the wholesale level

  • Increase tax on diesel fuel at the pump from $0.16 to $0.175

  • Increase liquidated damages from overweight vehicles, based on weight

  • Impose abusive driver fees, with the rate based on accumulated driver demerit points

  • Increase grantor tax from $0.10 to $0.30 per $100 valuation

  • Dedicate auto insurance premium tax to transportation


Senate Proposal:Projected Effects on Funds


Senate Proposal:Projected Effects on Employment


Senate Proposal:Projected Effects on Income


House Proposal

  • Divert funds from the tax on auto-insurance premiums and from the recordation tax to back $583 million in bonded debt for, among other things, the relief of congestion in Northern Virginia and Hampton Roads

  • Use $553 million from the surplus to put toward $853 million in one-time-projects

  • Impose additional fines on abusive drivers to yield $590 million over four years


House Proposal:Projected Effects on Funds


House Proposal:Projected Effects on Employment


House Proposal:Projected Effects on Income


Summary:Effects After Four Years

  • Governor:

    • $2.7 billion in new state funds

    • $0.9 billion in other funds

    • 6,884 new private sector jobs

    • $179 in increased per-capita disposable income

  • Senate:

    • $4.5 billion in new state funds

    • 5,821 new private sector jobs

    • $179 in increased per-capita disposable income

  • House:

    • $729 million in new state funds

    • $1.4 billion in other funds

    • 8,137 new private sector jobs

    • $130 in increased per-capita disposable income


Beacon Hill Institute

8 Ashburton Place

Boston, MA 02108

Phone: 617-573-8750

Fax: 617-994-4279

E-Mail: dtuerck@beaconhill.org

Web: www.beaconhill.org


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