Business groups advocate higher taxes

RICHMOND — Virginians must pay higher taxes to preserve the state’s quality of life and maintain essential government services, leaders of three business groups said yesterday.

The groups did not choose between competing tax reform plans by Gov. Mark Warner and state Sen. John H. Chichester but embraced the general approach of both.

“The General Assembly has to show the leadership that is required by the people of Virginia to find a compromise,” said S. Buford Scott, of the Scott & Stringfellow brokerage in Richmond. “If they don’t, why did we elect them?”

Mr. Scott is chairman of the business advocacy group known as Virginia Free — the Virginia Foundation for Research & Economic Education Inc. He was joined at a state Capitol news conference by representatives of the Northern Virginia Roundtable and the Virginia Business Council, a coalition of more than 30 large corporations.

Echoing remarks by the Democratic governor in his State of the Commonwealth speech Wednesday night, Mr. Scott said the state cannot rely on economic growth and spending cuts to balance the budget. “The spending side has been cut about as far as it can be cut,” he said.

Mr. Warner is pushing a package of tax cuts and increases that would raise about $500 million a year in additional revenue. Mr. Chichester, Stafford Republican and chairman of the Senate Finance Committee, has proposed increases totaling $2.5 billion annually.

The centerpiece of the governor’s plan is a 1-cent sales tax increase. He also would raise the cigarette tax and the income tax rate for the wealthiest 8 percent of Virginians as well as close a couple of loopholes in the corporate income tax.

“We’re prepared to step up and pay more on the corporate side if that’s what is needed to maintain the quality of life in Virginia,” said James W. Dyke Jr., chairman of the Northern Virginia Roundtable, which represents information technology, government contracting, real estate and other businesses.

The positions taken by the three organizations are at odds with that of the National Federation of Independent Business, a small-business coalition that is opposing the tax increases.

Supporters of the tax plans face a difficult battle — especially in the House of Delegates, where Speaker William J. Howell is leading the opposition.

“It’s a basic philosophical difference the two sides have,” Mr. Howell said at a briefing for reporters. “The governor would say expenses are going up 8 percent a year and there’s nothing you can do about it. I reject that.”

The legislature and the governor have offset $6 billion in budget shortfalls over the past two years largely through spending cuts, but Mr. Howell said he believes more can be found.