- The Washington Times - Tuesday, July 15, 2003

RICHMOND — Virginia residents will have to either pay more taxes or wait longer for the car tax to be fully repealed, members of the newly formed Tax Reform Commission told The Washington Times yesterday.

“If we finish the car tax and the estate tax, which I want to do, we can’t expect the economy to grow at [a high] rate,” said state Sen. Emmett W. Hanger Jr., co-chairman of the commission. “We are going to have to replace that revenue.”

State Sen. John H. Chichester, chairman of the Senate Finance Committee, agreed. “I don’t think [the car-tax repeal] can go any further than it is now unless I see some miraculous changes and some extraordinary growth,” he said.

According to a report by the Virginia Department of Taxation, it would cost Virginia $1.3 billion to fully fund the car-tax repeal at 100 percent in fiscal 2005.

The car-tax repeal, proposed in 1998 by Gov. James S. Gilmore III, has been stalled at 70 percent since 2001 because of the state’s financial condition.

During the last General Assembly session, lawmakers passed a repeal of the estate tax. But Gov. Mark Warner, Democrat, vetoed the bill, saying it would affect only a small number of high-income people and that it was not prudent considering Virginia’s financial situation.

Mr. Hanger, Augusta County Republican, said he hoped to propose a plan on how the state could fully repeal the car tax sometime in the next month. “We started down that road, and it is viewed as an unfair tax, [but] I think you have to raise that revenue somewhere else,” he said.

Mr. Chichester, Fredericksburg Republican, said core state services would suffer if the car tax and estate tax were fully eliminated.

The commission members’ comments came after their latest meeting on restructuring the state’s 88-year-old tax code. Mr. Warner did not attend yesterday’s meeting, which was held in the General Assembly building, because he is not a member of the commission.

The commission is made up of 10 lawmakers, plus Secretary of Finance John M. Bennett and Tax Commissioner Kenneth W. Thorson. It is expected to produce a tax-reform package for lawmakers to address when they return in winter.

After selecting Delegate Harry J. Parrish, Manassas Republican, and Mr. Hanger as co-chairmen, members were reminded by lawmakers not on the commission of the task facing them.

“Simply put, the anticipated growth in the general-fund tax revenues under the current tax structure will not fund the cost of our obligations in the next biennium,” said Delegate Harvey B. Morgan, Gloucester Republican.

He encouraged members to look at alternative ways of raising revenue that would be fair to consumers and businesses. For example, dry-cleaning and lawn care services are not taxable, yet a consumer pays taxes on the detergent and fertilizer he or she buys at the store.

“What is the rationale that allows one method of lawn care or clothing care to be taxed and the other not to be taxed? These are just two small examples, but illustrate why our system must be reformed,” Mr. Morgan said.

Delegate James H. Dillard II told the committee if it does not fix the system, the state will face tougher financial challenges. “Without meaningful tax reform, we are on the verge of repeating the [Department of Motor Vehicles]-closing debacle, and then some,” said Mr. Dillard, Fairfax Republican.

In order to deal with the state’s $6 billion budget shortfall, Mr. Warner last fall closed 12 branches and reduced service hours statewide at the advice of the DMV. Public outcry led Mr. Warner and lawmakers to restore funding and resume operations of the branches.

Yesterday’s meeting gave lawmakers a chance to see what areas of the tax code can be changed. The commission hopes to present a formal plan when the General Assembly reconvenes.

Members of the commission also were assigned subcommittee positions to study the tax code in more detail. A date for the commission’s next meeting was not scheduled.

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