Tuesday, November 13, 2001

Virginia Gov. James S. Gilmore III’s office said yesterday the budget is “still developing” and it has not announced a decision on whether the car tax will be fully phased out next year.
Mr. Gilmore would neither confirm nor deny news reports that he will freeze the car-tax cut at 70 percent instead of advancing it to 100 percent next year because of the state’s economic downturn.
Yesterday, his office said the budget process is “very much under way” and is “still developing.”
“A lot of decisions have not been made yet,” Gilmore spokeswoman Lila White said.
But the chairman of the House Appropriations Committee said the car-tax cut is dead for now.
Delegate Vincent F. Callahan Jr., Fairfax Republican, told The Washington Times yesterday the full car-tax cut can’t be financed any time soon. “There’s just no money to cover it,” he said. “There’s no way we can go through with it.”
Some delegates have already heard that Mr. Gilmore’s final budget, which he is expected to propose next month, will not include the final phase of the car-tax cut.
The state now pays localities 70 percent of the tax on the first $20,000 of a car’s value and the car owners pay the remaining 30 percent. The difference between keeping the tax cut on schedule and freezing the rebate next year comes to $211.49 for a typical Fairfax County household. It means less to other parts of the state, where the tax rate and car values are lower than in Northern Virginia.
Mr. Callahan said yesterday the state’s economy will have to turn around and revenues will have to increase in order to implement the full car-tax rebate. But when that will happen is anyone’s guess.
“We’re definitely going to have to get out of the recession first before we can do anything, and who knows when that will be,” Mr. Callahan said. “[The recession] might run until next summer or perhaps even later. We’ll just have to wait it out.”
Under the 1998 law, the car tax was to be phased out over a five-year period ending in 2002, but only if certain triggers were met. For each phase to go forward, lawmakers required that revenue grow by 5 percent over the previous year, and that revenues come within one-half percent of the projected growth rate in the appropriations act in effect at the time.
It would take an estimated $1.5 billion each year to replace the lost car-tax revenue, according to state figures.
Gov.-elect Mark R. Warner, a Democrat, never committed himself to fully implementing the car-tax rebate next year, always saying he was going “to look at the books” before making any decisions. Mr. Warner only promised to eliminate the car tax sometime during his four-year term, said his spokesman, Mo Elleithee.
“Mr. Warner has always said he’s got to look at the books and find out the economic state of the commonwealth before committing himself to cutting the tax completely,” Mr. Elleithee said last night. “Until he has the opportunity to look at the books, he can’t say anything.”
Mr. Warner, who returned home from vacation last night, is expected to meet with Mr. Gilmore’s budget advisers sometime this week.
Freezing the tax cut is common sense after the September 11 terrorist attacks on the Pentagon and the temporary shutdown of Ronald Reagan Washington National Airport, some delegates said yesterday.
“September 11 changed everything in terms of the economy,” said Delegate Jay O’Brien, Fairfax Republican. “We have to focus on other things right now, like public safety. It’s a new world we’re living in, a new reality.”
House Speaker S. Vance Wilkins Jr., Amherst Republican, agreed. “It’s no surprise to me that the car-tax cut may not go through next year,” he said last night. “I’m sure we’ll cut it sometime soon, but I’m afraid it’ll be pretty rough to do it now because of the additional spending for public safety.”
When he ran for governor in 1997, Mr. Gilmore, a Republican, vowed to have the car tax completely phased out by the time he left office.
His commitment to staying on schedule with the phaseout pushing this year for a jump from 47.5 percent to the present 70 percent repeal in the tax was at the heart of the unprecedented budget impasse.
The House and the Senate deadlocked over the size of the rebate. A majority of delegates agreed with Mr. Gilmore that it should stay on schedule at 70 percent this year, but most senators wanted only a 55 percent rebate. In the end, the two sides couldn’t agree, and the state’s two-year, $50 billion budget wasn’t amended.

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