A new world of higher taxes?

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Monday’s vote by the Virginia House of Delegates to increase taxes by $500 million suggests that state politicians are moving toward some kind of consensus in favor of higher taxes. The legislation, passed by a 59-36 vote, was opposed by just six of the 61 Republicans in the 100-member House. The bill increases taxes by taking away sales-tax exemptions from a variety of industries, including airlines, railroads, telecommunications, utility companies and dry cleaners.

Ever since Democratic Gov. Mark Warner unveiled his own package, which increases taxes by $1 billion over two years, Republicans in the House, led by Speaker Bill Howell, have been under pressure to raise taxes. The pressure intensified last month when Senate Finance Committee Chairman John Chichester unveiled his own package of tax increases totaling $2.6 billion over two years. With Monday’s vote, however, Mr. Howell has taken a critical step toward higher taxes.

The vote by the House has left Republicans reeling and Democrats eagerly anticipating the opportunity to criticize GOP legislators for supporting higher taxes. “It’s the wrong direction to take this state,” said Lt. Gov. Tim Kaine, the likely Democratic nominee for governor in 2006. Delegate Robert McDonnell, a Virginia Beach Republican who plans to run for attorney general next year, decided not to vote for or against the proposal, saying he needed more time to examine its impact.

This much is clear: The tax increase stands a good chance of alienating Republican grass-roots activists. In an interview yesterday and in a memo sent to Republican leaders around Virginia, former state Republican Party Chairman Patrick McSweeney was sharply critical of Republican legislators’ willingness to agree to higher taxes. He noted that Mr. Howell and Delegate Vincent Callahan, chairman of the House Appropriations Committee, proposed a set of “Guiding Principles for Tax Budget Deliberations.” One important principle mentioned in this memo was that every reasonable option for cutting spending should be exhausted before higher taxes are considered. But the reality is that there has been little sustained effort to look at ways to cut the budget. A large part of the problem, Mr. McSweeney contends, is that the Warner administration has been so determined to increase taxes that it has failed to work cooperatively with the General Assembly on finding places to streamline state government.

Although we would have preferred to have seen Republicans stand firm against tax increases, the reality is that there is no significant number of tax-increase opponents left in Richmond today. Thus, the main order of business for Republicans should be to try to mitigate the damage from tax increases by negotiating with the governor for some off-setting cuts in spending.

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