- The Washington Times - Thursday, August 12, 2004

Virginia Gov. Mark Warner rejected House Speaker William J. Howell’s proposals to lift the cap on the state’s car-tax relief program or to eliminate the unpopular tax.

A spokeswoman for the Democratic governor said late Wednesday that efforts to change the car-tax cap would not be met favorably, particularly because the cap had been lauded by financial analysts on Wall Street who secured Virginia’s coveted AAA bond rating in June.

“Completing it without a way to pay for it would fall into the category of re-digging the hole we just got out of,” said Ellen Qualls, a spokeswoman for Mr. Warner.

Miss Qualls’ statement comes in response to Mr. Howell’s comments published in yesterday’s editions of The Washington Times.

Mr. Warner’s initial proposal to fully eliminate the tax by 2008 was funded by an income tax increase most in the Republican-controlled legislature did not support. The General Assembly ultimately capped the relief at 70 percent indefinitely, but now Mr. Howell and other lawmakers say they want to eliminate the tax.

Mr. Howell, Stafford Republican, told The Times that he wants to amend the state constitution to abolish the car tax and replace it with a system in which local governments would receive a certain percentage of the income tax raised by the state.

Mr. Howell said his proposal does not equate to a new tax. “I don’t think we should increase a tax to get tax relief,” he said.

Miss Qualls said the speaker’s proposal is “worthy of discussion,” but noted that a piecemeal approach to the tax code results in fiscal trouble.

However, Mr. Warner welcomed Mr. Howell’s idea to create charter university status for some of the state’s colleges, a system in which the schools accept less money from the state if restrictions on out-of-state enrollment and tuition are lifted.

The governor thinks the charter university issue merits significant attention in the 2005 legislative session, and called it a “strong proposal” that “raises a lot of important questions” about how the state runs its higher education system.

“The governor looks forward to working with the speaker on a host of issues facing Virginia next year, without the clouds of tax reform hanging over everything else,” Miss Qualls said.

“While the governor and the speaker have not agreed on some key issues in the last few years, I know they both continue to seek common ground and civil debate in the process.”

Mr. Warner and Mr. Howell sparred over tax increases during the legislative session this year.

Mr. Howell acknowledged that his proposal to eliminate the car tax would not be popular with Mr. Warner.

Mr. Warner and the Senate initially favored higher taxes as part of an overall tax reform plan this year. Legislators rejected those plans and passed a package that raised the state sales, cigarette and real estate taxes by $1.38 billion and lowered others.

The tax debate might not be quite over, however.

Many lawmakers agreed with Mr. Howell’s assessment that the car tax must be addressed next year.

The car tax issue is facing more scrutiny since the state reported a $323.8 million budget surplus this year, and continued economic gains signal an even larger surplus next year.

There already are bills in the works to fully eliminate the car tax, or at least lift the cap next year, when all 100 House delegates are up for re-election.

The cap freezes the amount the state reimburses localities at $950 million a year for revenue lost under the car-tax phaseout. As a result, Virginia vehicle owners are likely to pay higher car-tax bills beginning in 2006.

House Appropriations Committee Chairman Vincent F. Callahan Jr., who fought the cap, said there will be efforts to lift it. “We owe it to the people of Virginia to get rid of the car tax,” the Fairfax Republican said.

Miss Qualls noted that former Gov. James S. Gilmore III initially said the full phaseout of the car tax would cost the state about $660 million. However, that figure has grown to nearly $1 billion, and the state is reimbursing localities only 70 percent of the tax.

Mr. Gilmore, a Republican, said he revised that figure to $900 million after he was elected in 1997.

Senate Finance Committee Chairman John H. Chichester also proposed during the last session to eliminate the car tax by next year.

This plan also was rejected, because it also relied on raising the income tax.

The Stafford Republican has said that any efforts to lift the cap won’t pass the Senate unless funded by tax increases.

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