Virginia-STAMP

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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
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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.
• BHIs major capabilities include
• State Tax Analysis Modeling Program (STAMP)
• Local Area Modeling Program (LAMP)
• Education Assessment Model
• State Competitiveness Report

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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

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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
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STAMP Analysis of2006 Tax Change Proposals in
Virginia

• Proposals Analyzed
• Governor
• Senate
• House

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Governors 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 Virginias 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

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Governors ProposalProjected Effects on Funds
Funds 2007 2008 2009 2010
m m m m
State Funds 539.54 633.78 689.00 749.41
         
Local Funds (6.99) 3.13 14.53 26.42
         
Total 532.55 636.92 703.53 775.83
         
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Governors ProposalProjected Effects on
Employment
Employment Sector 2007 2008 2009 2010
         
Total Employment jobs jobs jobs jobs
(911) 2,750 6,540 10,267
         
Private Employment jobs jobs jobs jobs
(1,834) 809 3,908 6,884
         
Government Employment jobs jobs jobs jobs
923 1,940 2,633 3,383
         
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Governors ProposalProjected Effects on Income
Type of Income FY 2007 FY 2008 FY 2009 FY 2010
         
State Personal Income, nominal bn bn bn bn
-0.096 0.159 0.424 0.693
         
Disposable Income, real bn bn bn bn
0.087 0.677 1.299 1.916
         
Disposable Income per capita, real
14.012 69.688 125.891 179.027
         
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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

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Senate ProposalProjected Effects on Funds
Funds 2007 2008 2009 2010
m m m m
State Funds 1,005.12 1,084.46 1,181.56 1,228.75
         
Local Funds 1.75 14.48 27.03 42.30
         
Total 1,006.87 1,098.94 1,208.59 1,271.04
         
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Senate ProposalProjected Effects on Employment
Employment Sector FY 2007 FY 2008 FY 2009 FY 2010
         
Total Employment jobs jobs jobs jobs
2,540 7,049 11,476 16,203
         
Private Employment jobs jobs jobs jobs
(5,865) (2,036) 1,525 5,821
         
Government Employment jobs jobs jobs jobs
8,405 9,085 9,951 10,382
         
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Senate ProposalProjected Effects on Income
Type of Income FY 2007 FY 2008 FY 2009 FY 2010
         
State Personal Income, nominal bn bn bn bn
0.651 0.948 1.274 1.597
         
Disposable Income, real bn bn bn bn
-0.071 0.668 1.406 2.185
         
Disposable Income per capita, real
-22.502 47.073 112.884 179.323
         
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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

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House ProposalProjected Effects on Funds
Results of the simulation 2007 2008 2009 2010
m m m m
State Funds 156.21 172.87 190.51 209.52
         
Local Funds 5.18 12.52 19.43 27.20
         
Total 161.38 185.39 209.94 236.72
         
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House ProposalProjected Effects on Employment
Employment Sector FY 2007 FY 2008 FY 2009 FY 2010
         
Total Employment jobs jobs jobs jobs
1,237 3,586 5,864 8,139
         
Private Employment jobs jobs jobs jobs
2,152 4,194 6,171 8,137
         
Government Employment jobs jobs jobs jobs
(915) (608) (307) 2
         
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House ProposalProjected Effects on Income
Type of Income FY 2007 FY 2008 FY 2009 FY 2010
         
State Personal Income, nominal bn bn bn bn
0.088 0.241 0.398 0.555
         
Disposable Income, real bn bn bn bn
0.265 0.648 1.033 1.419
         
Disposable Income per capita, real
27.028 62.757 97.315 130.343
         
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SummaryEffects 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

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• Beacon Hill Institute
• 8 Ashburton Place
• Boston, MA 02108
• Phone [phone]
• Fax [phone]
• E-Mail dtuerck_at_beaconhill.org
• Web www.beaconhill.org