- The Washington Times - Friday, February 16, 2001

While America eagerly awaits a proposed federal tax cut, the Virginia Senate voted on Feb. 8, by a vote count of 36-6 to adopt a budget that would halt Gov. Jim Gilmore's signature legislation, eliminating the "car tax."

The Senate Budget increases taxes, by $264 million over a 2-year biennial budget (FY2001-FY2002). Sens. Roscoe Reynolds, Frank Ruff, and Frank Wagner broke a pledge that states that they "would oppose any and all efforts to raise taxes."

Under current Virginia statute and budget, the car tax burden of Virginia taxpayers is established at 30 percent (the state to cut 70 percent) in 2001 and 0 percent (state to cut 100 percent) in 2002. The Personal Property Tax Relief Act of 1998 was Mr. Gilmore's signature legislative achievement to phase-out the car tax in Virginia completely on qualifying vehicles by 2002. The General Assembly passed that law and the governor signed it in 1998. The phase-out proceeded without problem in 1998 (12.5 percent cut), 1999 (27.5 percent cut), and 2000 (47.5 percent cut).

In December, Mr. Gilmore presented budget amendments to the current budget that reduced spending in some areas as a reaction to slower economic growth (i.e., slower revenue growth) than anticipated. Spending on public education, both K-12 and higher education, was increased, but central government agencies in Richmond were directed to become more efficient in their operations by 3 percent in 2001 and 6 percent in 2002. In all, the budget savings demanded amounted to about 1 percent of the state's entire budget.

Meanwhile, Mr. Gilmore's amendments to the existing budget maintained current tax burdens prescribed by the Personal Property Tax Relief Act of 1998 and the existing budget taxpayers owe 30 percent of their car tax bills in 2001 and 0 percent in 2002.

Virginia's senate, led by Finance Chairman John Chichester, has voted to alter taxpayers' car tax burdens as follows: Taxpayers will owe 52.5 percent of their car tax burdens in 2001 and 30 percent in 2002. By altering the existing tax burdens prescribed under existing statute and the existing budget, Virginia's senators have voted to increase each taxpayer's car tax burden.

Put another way, under current law, a taxpayer owes 30 percent on his car tax bill in 2001. But the Senate has voted to require him to pay 52.5 percent. And, under current law, a taxpayer owes 0 percent in 2002. But the Senate has voted to require him to pay 30 percent. By comparison, Mr. Gilmore's budget generates administrative efficiencies in central government agencies totaling $206 million over two years, or less than 1 percent of the $24 billion general fund biennial budget.

The difference between the two figures ($264 million Senate tax increase vs. $206 million governor's productivity savings) is only $58 million minuscule in a two-year $24 billion general fund budget. One could cut pork, or as Mr. Gilmore proposed shift some capital projects in the current budget from cash to debt and pay the debt with tobacco settlement funds, not taxpayer funds, over 20 years. That saved the taxpayers but got colleges new buildings, for example.

Some examples for what this tax increase means for families in Northern Virginia: Under existing law, a two-car family (one car valued at $15,000 and one at $8,000) owes $276 in 2001 and $0 in 2002. Under the senator's tax increase, the family owes $483 in 2001 and $276 in 2002 a tax increase of $483.

The senators argue they are merely phasing-in car tax relief slower by freezing the car tax at 52.5 percent in 2001 and cutting it to 30 percent in 2002. That argument might fly were there not a pre-existing legal commitment to 30 percent and 0 percent in statute and budget law. Moreover, the Senate's budget dramatically increases spending in other areas with the dollars saved from a delayed phase-in meaning, the tax increase is being spent on additional government spending.

One additional word on the subject. The senators have accused Mr. Gilmore of borrowing (bonded indebtedness) in order to give tax relief. It is true the governor proposed a bond totaling about $600 million, which would put him at about the same amount of debt issued by Gov. George Allen and much less than prior Govs. Wilder and Baliles, but all interest for the bonds is to be paid not with tax dollars paid by Virginia taxpayers but by tobacco settlement funds paid to Virginia.) Virginians elected a Republican majority in both houses of the General Assembly because of its willingness to prioritize individual taxpayers above government spending.

Everyone who purchases a motor vehicle already pays a sales tax, a title tax, and then fees for license and registration plus motor fuels taxes every time the car needs gas. You figured, correctly, that people already pay enough taxes for the privilege of owning a motor vehicle a necessity in today's society. How quickly they forget the past.

Mr. Gilmore's opponents today sound eerily familiar to comments made about his car tax cut during his campaign for governor. On the eve of the election, then President Bill Clinton told Virginians that such a tax cut was selfish and greedy. He went on to sweep the election.

This is the only fiscally responsible course, argues Mr. Chichester. He and other lawmakers claim that the promised phase-out will shortchange other state programs and lead to a budget deficit. "We will stop the car tax phase out to keep our children and grandchildren from paying 20 years for a benefit we receive now," he told The Washington Post.

What Mr. Chichester and his pro-tax-and-spenders hope you don't know is that since 1997, the state (not including locality increases with local tax dollars) has increased spending on K-12 education by $1.2 billion, or 35 percent. Since 1997, state spending per student has increased 28 percent per student. Since 1997, the state has increased spending on higher education by more than $500 million, or 54 percent. Since 1997, state spending per student has increased 46 percent. Tax spending from Virginia's general fund is up 42 percent since 1997; tax spending from Virginia's general fund outpaced inflation by a rate of more than 3 to 1 since 1997. Tax spending from Virginia's general fund per citizen (per capita) has grown 38 percent per person since 1997.

The point is that state government in Virginia is spending more money, by all measures, than ever in its history, especially in sacred areas of K-12 and higher education but it's still not enough for big spenders in Virginia's Senate who invoke fiscal responsibility to mask their big spending pathology. Mr. Gilmore's opponents point to a budget shortfall, warn of impending doom and immediately conspire to raise taxes.

It seems the senators, who do not face re-election this year, forget that this tired argument no longer fools taxpayers. They know better than to fall for this kind of political speechifying.

Damon B. Ansell is vice president of policy for Americans for Tax Reform.

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