- The Washington Times - Saturday, December 12, 2009

RICHMOND | One week before Gov. Tim Kaine, a Democrat, submits an austere budget to cope with a nearly $4 billion shortfall, he and Republican legislative leaders feuded Friday over whether to boost revenues or make drastic cuts.

Five conservative legislative leaders sent Mr. Kaine a letter warning him not to end some tax breaks in the budget he proposes next week. To do so, they wrote, would be “counterproductive at the very least.”

Mr. Kaine fired back Friday with his own letter, scolding the lawmakers for “a failure to grasp the stark realities of the coming budget.”

The four Republicans - Lt. Gov. Bill Bolling, Sens. Thomas K. Norment of James City County and William Wampler of Bristol, and House Speaker William J. Howell - and House Appropriations Committee Chairman Lacey Putney, a Bedford independent, noted a pledge by Republican Gov.-elect Robert F. McDonnell to reject anything viewed as a tax increase.

“The incoming administration has set forth very clearly that they will not support a tax increase,” the legislative leaders wrote. Nor did candidates in last month’s House races advocate new taxes in a poor economy, they wrote.

“Accordingly, we believe it would be counterproductive at the very least if your proposed final budget included any increase in existing taxes, proposals of new taxes or reductions to major tax relief programs,” the letter says.

After Mr. McDonnell defeated Democrat R. Creigh Deeds in a landslide last month, pacing a GOP sweep of all three state offices and a net gain of six House seats, the Republicans have the political strength to easily make good on their pledge.

Mr. Kaine is considering eliminating some antiquated or costly tax exemptions and credits. He said last week that he would propose eliminating the “dealer discount,” a sliver of the state sales tax that retailers keep for collecting and remitting the state tax.

Since his election, Mr. McDonnell has stopped short of telling Mr. Kaine how to construct the budget he presents to House and Senate money committees. But Mr. Kaine turns the office over to Mr. McDonnell at noon Jan. 16, and Mr. McDonnell has said he would rewrite Mr. Kaine’s budget if necessary to eliminate anything he views as a tax increase.

In an interview, Mr. McDonnell said Thursday that he would “probably not” object to ending the dealer discount, which Mr. Kaine projects would net an additional $70 million annually for fiscal 2011 and 2012. But that’s a tiny bit of a shrinking general fund budget that now stands at slightly more than $14 billion for this fiscal year.

“I said major revisions of tax exemptions like the car tax. I still have to look at the details of the dealer discount, but I didn’t call it a tax increase,” Mr. McDonnell said.

Mr. Kaine has not ruled out repealing the 1998 phaseout of the state property tax levied on personal cars and pickup trucks, among other options.

Lynda Tran, a spokeswoman for Mr. Kaine, would not say which, if any, tax breaks the governor would remove, calling it “all written in pencil right now.”

Mr. Kaine and the General Assembly have already dealt with shortfalls totaling $7 billion through program cuts, layoffs, cost-cutting and use of the state’s “rainy day” reserve fund and debt. Ms. Tran said the consequences of further cuts are dire. The state faces the prospect of funding state 2011 operations with no more cash than was available in 2005. And that doesn’t account for inflation or greatly increased need born of a bad economy.

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