DATE: Monday, October 20, 1997              TAG: 9710180009

SECTION: LOCAL                   PAGE: B8   EDITION: FINAL 

TYPE: Editorial 

                                            LENGTH:   58 lines

VIRGINIA TAXES REVISITED THEY'RE STILL LOWWHERE'S THE WISDOM OF MASSIVE TAX CUTS WHILE REPAIRS TO SCHOOLS AND ROADS ARE SORELY NEEDED?

A new examination of state and local taxes concludes that Virginia's are the 46th-lowest in the nation.

That's no argument for raising them. When it comes to taxes, low beats high. But the new study does raise questions about the wisdom of massive tax cuts at this time, while billions of dollars are needed to repair schools and build roads.

The study was done by the Hampton Roads Planning District Commission as part of its ongoing effort to assess this region's ability to compete economically with other metropolitan areas. Obviously, our tax rates are not an obstacle to recruiting companies.

Commission economists compared Census Bureau information for state and local receipts from taxes and fees in all 50 states. On the advice of Census Bureau officials, corporate taxes were subtracted out, on the theory that those taxes are paid by customers around the nation in the form of higher prices. (Actually, Virginia corporate taxes are the 40th-lowest per capita and 45th-lowest as a percent of personal income. So leaving the tax in would not have altered Virginia's overall low ranking by much.)

The study showed that the average amount collected in state and local taxes is $111 per $1,000 of income, but in Virginia, $99 is collected per $1,000 of income.

Research over the years has been inconclusive on the overall effects of tax cuts on states' and economic regions' economics, said John W. Whaley, the commission's economic director.

``We know that if we lower taxes we will stimulate the economy,'' he said, ``and that if we raise taxes we will slow the growth of the economy. However, another very closely related issue is the matter of expenditures. When we lower taxes, that gives us fewer revenues with which to pay for public services and infrastructure, and not paying for those things tends to retard growth. Reducing taxes stimulates growth, while reducing expenditures retards growth.''

So what's not clear is the net effect when both steps are taken.

The four states with lower tax loads than Virginia - Alabama, New Hampshire, Tennessee and Missouri - are not economic dynamos.

``We can't say that lowering taxes will necessarily stimulate growth,'' Whaley said.

What Virginia needs now are more and better roads and billions worth of new schools.

If investments are not made in those two areas - so workers can get to work and products can get to market, so companies can be certain of finding a trained work force - the lowest taxes in the world will not attract the employers we need, the ones who pay high wages. ILLUSTRATION: Graphic/The Virginian-Pilot

Tax Comparison

For complete copy, see microfilm

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