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

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

  2. 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

  3. 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

  4. 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

  5. STAMP Analysis of2006 Tax Change Proposals in Virginia • Proposals Analyzed: • Governor • Senate • House

  6. 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

  7. Governor’s Proposal:Projected Effects on Funds

  8. Governor’s Proposal:Projected Effects on Employment

  9. Governor’s Proposal:Projected Effects on Income

  10. 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

  11. Senate Proposal:Projected Effects on Funds

  12. Senate Proposal:Projected Effects on Employment

  13. Senate Proposal:Projected Effects on Income

  14. 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

  15. House Proposal:Projected Effects on Funds

  16. House Proposal:Projected Effects on Employment

  17. House Proposal:Projected Effects on Income

  18. 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

  19. 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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