Tax increases to affect smokers, cars

RICHMOND — Taxpayers in Virginia will dig deeper into their wallets now that the General Assembly passed record tax increases.

A family that spends $20,000 on items a year will pay $100 more per year in sales taxes. A family that spends $25,000 will pay $125 more in taxes and a family that spends $30,000 will pay $150 more.

The $1.38 billion tax plan boosts the state sales tax by one-half cent on the dollar and raises the cigarette tax to 20 cents per pack Aug. 1 and to 30 cents per pack March 1.

A pack-a-day smoker would pay $63.88 more for cigarettes this year and $100.38 more next year. The tax on a pack of cigarettes is now 2.5 cents, the nation’s lowest. Even with the increase, Virginia still will have one of the lowest cigarette taxes.

Taxpayers also will be impacted by the sales tax increase.

For example:

• Customers will have to pay $105 for a $100 set of pots and pans that now totals $104.50 after taxes.

• Customers will have to pay $20,994 for a $19,995 base model Toyota Prius that now totals $20,894 after taxes.

• Virginians will have to pay $4,198 for a $3,999 32-inch Plasma television at Best Buy that now totals $4,179 after taxes. A $399 Apple Pod player that customers now pay $416.96 after taxes will cost $418.95 later.

• Shoppers will have to pay $2,256 for a $2,149 leather sofa at IKEA that now totals $2,245 after taxes. Customers will have to pay $12,828 for a $12,218 11/4-carat diamond platinum engagement ring that now costs $12,767 with taxes.

The tax plan passed by the General Assembly earlier this week gave House and Senate budget negotiators the final tool they need to agree on the state’s two-year budget. Yesterday, the negotiators met to decide how to spend the money. They said they think a deal will be reached and be ready for a vote by the full legislature on Monday or Tuesday.

The plan also increases the tax on real-estate transactions from 15 cents per $100 of value to 25 cents and puts a 10 percent excise tax on other tobacco products such as chewing tobacco.

It also cut taxes, including eliminating the marriage penalty and raising the income-tax-filing threshold so the poorest Virginians will no longer have to file state taxes.

The plan also cuts the food tax in half-cent increments starting July 1, 2005, through July 1, 2007. In the end, Virginians will see a 1.5-cent reduction in the food tax, which means a $200 grocery trip will cost $3 less in 2007 than it does now.

The legislature also voted to freeze the popular car-tax relief program, which means car owners will still pay 30 percent of the car tax for at least two more years. But because localities will get the same amount as car values and the number of cars increases, the car tax bills likely will rise after 2005.

While negotiators are busy working out a budget, the question now is when do these new tax increases go into effect? It depends on when the General Assembly adjourns its special session.

Ending the special session today without a new budget is an option that legislative leaders are discussing, but not out of spite or to make a political point. It has to do with an obscure provision in the state constitution, the timing of enacting tax increases and, of course, money.

The constitution requires legislation passed in a special session take effect no sooner than the first day of the fourth month after the special session adjourns.

So if tax increases passed by the legislature Tuesday become effective Aug. 1, the current special session should adjourn by the end of April — today.

Delaying the effective date of the tax increases into September would cost the state treasury an estimated $50 million, government finance wonks have warned.

Even if negotiators agreed on a new two-year budget yesterday, the logistical and physical rigors of compiling, proofing, printing, presenting and voting on the massive roster of amendments by midnight today would be virtually impossible.

Officially ending the current special session today would preserve the August tax target, while House and Senate budget negotiators and money committee experts finish work on a spending bill at a more manageable pace, advocates said. Another special session could be convened a few days later to vote on the budget.

House and Senate floor sessions are scheduled for 3 p.m. today.

• Bob Lewis of the Associated Press contributed to this report.