- The Washington Times - Monday, August 23, 2004

RICHMOND — Gov. Mark Warner told tax and budget writers yesterday he will use a portion of the state’s $323.8 million year-end budget surplus to speed up an income-tax cut for Virginians, generating praise from Republicans.

In a speech to the House Appropriations, House Finance and Senate Finance committees, the Democratic governor said he will order a scheduled $100 increase on the personal exemption for Virginia tax returns to take effect on Jan. 1, 2005, instead of Jan. 1, 2006.

Under the accelerated cut, a family of four would get $400, Mr. Warner said. The tax cut will cost the state $28.3 million.

The latest tax cut comes after Mr. Warner successfully pushed for a record $1.38 billion tax-increase plan and the state ended its fiscal year with the unexpected surplus. Most of the surplus will be put into the state’s Rainy Day Fund and Water Quality Fund.

Some Republicans applauded the measure yesterday and suggested that the rebounding economy should lead the legislature to introduce further tax cuts.

“That’s the one benefit out of the surplus that the taxpayers get. I’m the glad the governor realized that taxpayers should get something out of the surplus,” said House Majority Leader H. Morgan Griffith, Salem Republican who opposed the tax-increase plan passed by the legislature this spring.

The Republican-controlled legislature in May approved the $1.38 billion tax-reform plan that raises the sales, cigarette and real-estate taxes while cutting other taxes. Lawmakers also capped the popular car-tax-relief program.

All 100 House delegates face re-election next year. Virginia voters also will elect a new governor, lieutenant governor and attorney general. Under Virginia law, governors cannot serve consecutive terms.

Some lawmakers said the accelerated tax cut was a small measure that likely won’t affect the outcome of any elections. However, the election-year session could see further attempts to cut and raise taxes in order to pay for transportation needs, they said. Some Republicans have said they also will try to roll back a freeze on the final phaseout of the car tax.

Mr. Griffith acknowledged that tax cuts are not likely to happen next year because any cuts passed in the House likely would fail in the more moderate Senate.

Senate Finance Committee Chairman John H. Chichester, who initially proposed a higher tax-increase package, said transportation must be addressed and has hinted that further tax increases might be the solution.

Mr. Chichester and Mr. Warner initially had proposed tax packages that allocated money to transportation. But the state’s new two-year budget contains no increase in transportation funding.

Mr. Warner said yesterday he will deposit $23.8 million into the Transportation Trust Fund to support transportation infrastructure, calling the amount “a drop in the bucket.”

“I’m going to continue talking with the legislators to see, particularly in an election year, what their appetite is for taking on the transportation issue,” Mr. Warner told reporters after the meeting.

Mr. Chichester said he is not sure whether transportation will come up next year. But, “someone at some point in time will have to seek out a remedy for that,” the Stafford County Republican said.

Mr. Warner also said the state will reallocate $7.6 million in interest earned by funds that are not part of the state’s general operating fund to transportation or higher education. The state also will move $8.3 million in research funding already appropriated for colleges and universities in 2006 to use this year.

Several Republicans yesterday accused Mr. Warner and Finance Secretary John M. Bennett of hiding news about the economic growth that led to a budget surplus until the legislature approved the tax increase in May.

“It really is a bottom-line business, and you guys really were a long ways off,” said Delegate M. Kirk Cox, Colonial Heights Republican and member of the House Appropriations Committee. “There’s a lot of cynicism up here.”

Mr. Bennett said there are “anomalies” that disrupt financial forecasts and that lawmakers had the same information he had.

Mr. Warner said he is confident that the tax-reform plan was needed to restore the state’s fiscal strength.

“Nothing that has occurred since May 7 has shaken my firm view that our decisions were sound, our actions were necessary and that the long-term effects will be positive for Virginia,” he said.

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