Senate likely to add tax increases

RICHMOND — The Senate Finance Committee is still working on a tax plan that will add more tax and fee increases to a House revenue bill — a move that some say will steer the state’s financial ship either toward a balanced budget or a government shutdown.

Senators had promised a counterproposal would be ready today, but last night said they will not have a deal in place.

Senate committee members have said the House plan, which would generate less than $700 million, needs more money to fund the state’s core services. However, they promised to keep the new net revenue close to $1 billion, after several House Republicans said they wouldn’t accept any more tax increases.

State Sen. Charles J. Colgan Sr., the ranking Democrat on the Senate Finance Committee, said last night the committee had not agreed on a response to the House plan.

Sen. Kenneth W. Stolle, a committee member, said the extra time is necessary to craft a tax plan everyone can support.

“We’ve all pretty much agreed that we’d rather take our time and get something that will work than try to rush something through,” said Mr. Stolle, Virginia Beach Republican.

Key lawmakers yesterday remained optimistic that the legislature is close to striking a compromise on the state’s two-year tax-and-spending plan.

“I think we’re getting very close,” said House Appropriations Chairman Vincent F. Callahan Jr., Fairfax County Republican and a budget negotiator. “I’m much more hopeful than I’ve been for the last 30 days.”

Last week, the House narrowly passed a two-year revenue package that would boost the state sales tax by a half-cent to a nickel on the dollar and increase the cigarette tax from 2.5 cents to 30 cents per pack by 2006. The House plan also cuts some taxes.

The Senate committee is likely to add an increase on the real estate transaction tax. The House stripped the real estate transaction tax increase from its tax bill moments before voting on the legislation.

Senators said the committee also might add a provision that would allow local governments to raise their local sales taxes by a half-cent on the dollar. The committee also might propose capping car-tax reimbursements, by setting a specific dollar limit on state reimbursements to localities for tax money they lose from phasing out the car tax.

After the Senate amends the bill, it will send it back to the House for a vote. If it passes, House and Senate budget negotiators will begin working toward a compromise.

If the measure fails, budget negotiators will return to the drawing board, and localities across the state will resume contemplating how they will respond if no agreement is reached by June 30.

Mr. Callahan said he thinks the Senate committee’s amendments will be “reasonable.”

The House tax bill passed only when 17 Republican delegates broke away from the antitax Republican leadership and voted in support of the measure. The House passed the measure 52-46.

Delegates added to the bill a measure that says the House proposal would expire Saturday if a budget is not yet in place. The Senate could change or reject that expiration date.

Both chambers were scheduled to meet in full session today, but when senators said there would be no deal, leaders reduced the session to “pro forma,” with only a handful of lawmakers present. Tomorrow’s scheduled veto session remains unchanged.

House Finance Chairman Harry J. Parrish said he thinks a budget deal could be reached by the end of the week.

“I feel sure we will have a budget in the next few days,” said Mr. Parrish, Prince William County Republican who authored the House tax-increase plan.

Delegate M. Kirk Cox, Colonial Heights Republican, said yesterday the spotlight will be on the 17 Republicans who voted for the tax-increase plan last week.

“I told the 17 they had better be prepared to vote for another tax increase,” said Mr. Cox, a budget negotiator who opposes tax increases. “All the pressure is on them.”

• This article is based in part on wire service reports.