RICHMOND — The House Finance Committee yesterday passed a bill that would boost the state sales tax from 4.5 percent to 5 percent and generate $972 million in revenue over two years.
The bill, which also would raise the cigarette tax, has the support of at least 17 Republicans who, with the Democrats, will try to pass the measure in the full House next week. The measure could break an unprecedented budget impasse with the Senate.
Without debate, the committee voted 10-8 to advance the bill to the full House. Two of the 14 Republicans and all eight Democrats on the committee voted for the measure. Four Republicans were asked by party leaders not to attend the committee meeting so the bill could advance to the House floor.
“This is a turning point,” said House Finance Committee Chairman Harry J. Parrish, Prince William County Republican, who authored the bill.
The bill’s passage, however, angered the Republican Party’s staunch antitax delegates, who yesterday delayed a full House vote on the tax bill until the lawmakers return Monday.
Antitax groups and Republican leaders said yesterday they will use the four-day break to “aggressively” try to pressure the maverick Republicans to vote against the tax increases.
Meanwhile, lobbyists said they will try to persuade those lawmakers not to change their votes.
Gov. Mark Warner called the measure a “breakthrough” that “will lead to a meaningful compromise.”
The Democratic governor, however, applauded the Republicans for breaking ranks with their antitax leadership to compromise with the Senate. The Senate wants to raise taxes by $2.4 billion.
“The 17 to 19 House Republicans were very bold and courageous. They need to be reinforced,” Mr. Warner said after meeting with the Republicans yesterday. “I urge those folks not to get browbeat over the next few days.”
Mr. Warner declined to take a stronger position on the bill in remarks to reporters.
“I don’t believe it’s going to be the final product,” he said. “There’s a recognition that the Senate is going to come back with modifications and changes. That’s the nature of the legislative process.”
House Speaker William J. Howell, Stafford County Republican, who opposes any general tax increases, predicted next week’s vote on the bill will be “very close.”
“I think a lot of people would feel a lot more comfortable if the governor were to come out with some strong language, ’This is it. This is as far as I want to go and I’m going to veto anything [higher] that comes in.’” Mr. Howell told reporters.
Senate Finance Committee Chairman John H. Chichester declined to comment on the bill yesterday because it had not yet passed the full House.
Delegate L. Preston Bryant, Amherst County Republican, said yesterday there are enough votes in the 100-member House to pass the tax-increase bill with a simple majority.
“I still feel very strongly that people feel very strongly in their stand,” Mr. Bryant said after meeting with the governor. “I think we can wrap this thing up sooner rather than later.”
The state legislature must pass a budget by June 30. If not, the state government will shut down July 1.
Yesterday, the House voted 60-39 to pass a one-year, stopgap budget which does not include any general tax increases, but would prevent disruption of government services if agreement on a two-year budget cannot be reached. Mr. Warner and the Senate oppose the plan.
Mr. Parrish’s bill would boost the sales tax from 4.5 cents to a nickel on the dollar; raise the cigarette tax from 2.5 cents per pack to 30 cents per pack in 2005; increase the tax on real estate transactions from 15 cents to 25 cents per $100 valuation; remove the sales tax on public service corporations; and close corporate-tax loopholes.
It also includes many tax cuts, such as eliminating the inheritance tax; reducing the 4 percent food tax to 3 percent by the end of 2006; increasing the personal exemption from $800 to $1,000; eliminating the marriage penalty; and changing the filing threshold so 140,000 of the state’s poorest residents pay no income taxes.
Senate budget negotiators have said they would withdraw their request to raise state income taxes if the full House passes Mr. Parrish’s bill.
Most House Republicans think taxes should be put on a voter referendum and that the state should further cut spending.
“It is time for us to hold the line and take a look at government in Virginia,” said Delegate John Welch, Virginia Beach Republican. “We, like everyone, must live within our means.”
Delegate L. Scott Lingamfelter, Prince William County Republican, told the committee on Tuesday that tax increases will hurt residents who are recovering from the recession. “Let’s remember that at the end of the day, this money comes from working people in this commonwealth,” he said.
But many lawmakers, like Delegate Phillip A. Hamilton, Newport News Republican, believe the bill could forge a budget compromise. “If it moves the ball along, it’s a step in the right direction,” said Mr. Hamilton, who also is a budget negotiator.
A bill that would raise the sales tax from 4.5 percent to 5 percent to fund education remains on the table in the House Finance Committee. The bill, authored by Delegate Robert D. Orrock Sr., Caroline County Republican, does not include tax cuts.
Lawmakers have said Mr. Orrock’s bill has more support in the House than the one proposed by Mr. Parrish.
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