Richard W. Rahn, Ph.D.
8917 Potomac Forest DriveGreat Falls, VA 22066Tel. (703) 759-0440Cell (703) 338-3994E-mail: RichardWRahn@yahoo.com
March 4, 2013The Honorable Robert F. McDonnellGovernor Office of the Governor Commonwealth of Virginia1111 East Broad StreetRichmond, Virginia 23219Dear Governor McDonnell:I regretfully tender my resignation as a member of your Joint Advisory Board of Economists.The reason for my resignation is that I strongly disagree with the new tax/transportation billthat you supported. Unfortunately, I was not asked for my advice (which I assume was alsotrue of the other Joint Advisory Board members) before you and the legislature embarked on passing the largest increase in taxes in the history of Virginia. This action will do damage tothe people of the Commonwealth of Virginia.The business climate and economy in Virginia have been at or near the best in the nation because Virginia has maintained a relatively small state government. The new taxes andspending will grow the size of the Virginia government relative to state’s GDP – a large andunnecessary step backwards.The new sales taxes and user fees should have been offset, at the minimum, with a reductionin the state income tax. As you know, Virginia relies more heavily on the income tax thanmost other states, and it is perhaps the most destructive tax. With the new increase in themarginal tax rate at the federal level, the combination of the Virginia and federal income taxat the top rates is well above the revenue maximizing tax rate.A number of other Republican governors are supporting major rate cuts in their state incometaxes, and in several cases proposing to totally eliminate the state income tax. Virginiashould be doing the same. I am fully aware of the cost of the increasing federal mandates, particularly Medicaid, on the Virginia budget. However, again other states are finding waysto deal with it without increasing taxes.Virginia has been innovative in the past for bringing more private sector funding for transportation infrastructure. These programs should be greatly expanded, as should