Senate gets budget

RICHMOND — The Senate Finance Committee yesterday passed a plan that would generate nearly $1 billion in revenue by raising the sales and cigarette taxes and perhaps end a weeks-long budget impasse.

The committee also approved a plan that would freeze the car tax reimbursement to local governments at $950 million annually, although drivers would continue to pay 30 percent of the tax assessed on cars and pickup trucks. Localities could increase other taxes to make up for the loss in revenue.

Senators said both plans were forged carefully through compromise with 17 House Republicans who earlier this month teamed with House Democrats to pass a plan that would have generated nearly $700 million in revenue by raising the sales and cigarette taxes.

“This is a bill that the House Republicans who stepped forward can support,” said Sen. Thomas K. Norment Jr., James City County Republican. “There was some question whether they would embrace this bill and I’m pleased to tell you that they will.”

The committee unanimously passed both plans yesterday. The full Senate is expected to vote on the two measures today.

The revenue plan is contingent on the passage of the car tax plan. If the bills pass, they will be sent to the House, which could vote on the plans today.

The committee’s revenue package keeps many of the elements of the House plan. It would boost the state sales tax from 4.5 cents to 5 cents on the dollar and raise the cigarette tax from 2.5 cents per pack to 20 cents on Aug. 1 and to 30 cents per pack starting March 1. It also eliminates corporate tax loopholes.

Localities now receive 1 cent on the dollar of the sales tax, but under the new plan they would receive 1.25 cents on the dollar. The remainder would go to the state.

The committee plan increases the tax on real estate transactions from 15 cents per $100 of value to 25 cents, and it strips the elimination of the estate tax that was included in the original House plan.

The car tax is one of the largest items in the state budget, at a total of about $860 million per year. Because Virginians are buying more expensive cars, that figure is expected to grow to about $950 million in 2005 and increase by $150 million each year. The car tax plan freezes the payment to localities at $950 million.

James S. Gilmore III, a Republican, won the governorship in 1997 in part by pledging to fully eliminate the car tax by 2002. However, the popular car tax relief program was frozen at 70 percent in 2001, when the cost of the program turned out to be hundreds of millions of dollars more than estimated. Under the measure passed yesterday, the program would remain frozen at 70 percent indefinitely.

The committee yesterday also made significant changes to the original $690 million House revenue plan in order to raise enough money to fund core services and provide tax fairness for the poor. The revised plan will create net new revenue of about $984 million over two years but also cuts the food and income taxes.

“This hasn’t been an easy task,” said Senate Finance Committee Chairman John H. Chichester, Stafford County Republican. “I’m sure an impatient Virginia has been waiting for some time for us to complete our work.”

Gov. Mark Warner, a Democrat who worked with Republicans and Democrats to encourage a budget compromise, said the measure could end the impasse.

“With positive action tomorrow by both chambers, we can finally provide Virginians with a fiscally responsible budget,” Mr. Warner said, adding that failure to pass the proposal would disrupt the lives of millions of residents.

Sen. Richard L. Saslaw, Fairfax County Democrat, said he would not worry about whether the fragile coalition will hold in the House.

“We’ll send it over there and if they don’t like it they can vote no and if they like it they can vote yes,” he said.

“That’s the way it is.”