House OKs rise in taxes

RICHMOND — The House yesterday narrowly passed a $743 million compromise revenue plan that would raise the sales and cigarette taxes, the first statewide tax increase in nearly 20 years.

Delegates passed the plan 52-46, a vote achieved by 17 Republicans breaking from their majority caucus to partner with 35 Democrats. Two delegates, the only independents, were absent.

Democrat Lionel Spruill of Chesapeake accidentally voted against the plan. He later reversed his vote. House staff members said the official vote will remain 52-46 because they do not change votes after the roll has been called. Mr. Spruill’s “Yes” vote will be noted, however.

Moments before the final vote, a portion of the bill that would have raised the tax on real estate transactions was eliminated, dropping the total revenue raised from $972 million to $743 million.

The Senate Finance Committee is scheduled to vote on the House plan today. The plan, offered by some House Republicans in hopes of ending the monthlong budget impasse, faces an uncertain future in the Senate.

Senators said yesterday they might have to tack on additional tax increases to the plan, but gave no specific figures. If the increases are too high by House standards, the House coalition forged to end the impasse may fall apart.

The plan boosts the state sales tax from 4.5 cents to a nickel on the dollar and the cigarette tax from 2.5 cents per pack to 20 cents per pack, starting Sept. 1. The cigarette tax would rise to 30 cents per pack next year. It also reduces the food tax, eliminates the “death” tax and cuts several elements of the income tax.

The legislature has not approved such a package since 1986.

House Appropriations Committee Chairman Vincent F. Callahan Jr., who voted in favor of the tax bill, said many of the pro-tax delegates “just want to get it over with.” He said they are voting for a “moderate revenue increase” to compromise with the Senate.

However, if the Senate asks for more taxes, “the whole thing could collapse,” said Mr. Callahan, Fairfax County Republican.

“The hang-up is that they want to spend more money than we do,” he said. “We can’t [compromise] with a recalcitrant Senate who won’t work with us.” Senators said they are not seeking major increases, but will add some amendments.

“We said we will stay as close to that $972 [million] as we possibly can, and we’ll keep it under $1 billion,” Sen. Thomas K. Norment, James City County Republican, told reporters, referring to the earlier House figure.

Senate Finance Committee Chairman John H. Chichester wouldn’t say if the Senate planned to add tax increases.

“There are various aspects of that bill that will have to be dealt with by the Finance Committee, just like any other bill,” the Stafford County Republican said. “As to what the committee will do with it, that remains to be seen.”

Mr. Chichester also wouldn’t say whether he likes the House plan. “It raises some revenue and that’s a good thing. It’s moving in the direction of positive revenue. If your glass is half-full, I look at it in a positive sort of way,” he said.

The House amended the bill before voting on it yesterday.

House Majority Leader H. Morgan Griffith, Roanoke County Republican, added a clause that says the tax-increase package will expire at midnight April 24 if there is no two-year budget in place.

In addition, the cigarette-tax increase was lowered to a figure delegates said was amenable to tobacco company Phillip Morris, which is based in Richmond.

Many Republicans castigated their renegade counterparts for voting for tax increases.

“This is an act of political infidelity,” said Delegate Robert G. Marshall, Prince William County Republican. “It will be followed by more.”

Mr. Marshall and other Republicans against the tax increases offered nearly 15 hostile amendments, including efforts to strip any tax increase from the legislation. Those amendments failed.

One of those amendments would have changed the name of the bill from the “Tax Reform and Compromise Act” to the “Net Tax Increase Act.”

Another raised the sales tax from a full percent — from 4.5 percent to 5.5 percent — to suggest the senators probably would do the same once the bill advances to the Senate. The amendment failed unanimously. One delegate rushed a copy of the vote to Mr. Chichester to show that a sales-tax increase of that size would not pass the House.

Senators promised to reach a compromise quickly.

“We have a lot of work to do to develop a consensus, but we’re going to try,” said Senate Majority Leader Walter A. Stosch, Henrico County Republican. “We will try to work within the net new revenue they have produced.”

After the vote, House Speaker William J. Howell called on Gov. Mark Warner to fully endorse the tax plan so the impasse can end.

“The governor clearly has the opportunity to say, ’This is a great bill. I’m going to do all I can to make sure the Senate doesn’t muck it up,’” said Mr. Howell, Stafford County Republican. “Let’s see if the governor wants to finally get involved.”

Mr. Warner, a Democrat, called the bill’s passage a “significant accomplishment.”

“Today’s vote creates momentum,” he said. “Leaders in the House and Senate should seize this momentum and work toward a budget compromise without further delay.”

However, the House recessed yesterday until 3 p.m. Tuesday. The delegates will then stay overnight to attend next Wednesday’s already-scheduled reconvened session where the governor offers amendments and rejects bills passed during the regular session.

Former Virginia Gov. George Allen, now a U.S. senator, said he was disappointed by yesterday’s vote.

“Increasing taxes on Virginians is not the way to create new jobs and help our economy grow,” said Mr. Allen, a Republican.