- The Washington Times - Friday, December 18, 2009

RICHMOND, Va. (AP) — The state’s hated local car tax would be replaced with a $2 billion-a-year income tax increase under the new budget Gov. Timothy M. Kaine presented Friday.

The departing Democratic governor’s tax proposal accompanied a budget that prescribes about $1.2 billion in spending cuts in a bid to reconcile a $3.6 billion state revenue shortfall for 2010 through 2012.

The plan was on an immediate collision course with incoming Republican Gov. Bob McDonnell, who has pledged to reject any general tax increase, and an anti-tax GOP House majority strengthened by last month’s elections.

Besides a budget bill that deeply cuts funding for state-supported colleges, mental health services and public safety, Kaine is preparing a separate bill that would phase in a 1 percent income tax increase over two years.

The massive income tax increase generates about $400 million a year more than the $1.6 billion the car tax now raises for localities. Local governments would also receive additional revenue the income tax generates.

As the state’s costs soared, Virginia capped total reimbursements at $950 million a year.

Kaine’s budget eliminates all money for reimbursements, but his independent tax measure would provide local governments all of that money, perhaps more.

The cuts reduce the biennial general fund budget to about $30 billion, about the size of the six years earlier. Kaine had already been forced to cut $7 billion from the budget since July 2008.

The cuts are scattered throughout the budget.

Funding for state-supported institutions of higher education would be cut by 26 percent over the next few years, a move certain to provoke sharp increases in tuition.

The state would cut about $12 million for mental health crisis services. The cuts would come just two years after mental health budgets were increased by $42 million in response to the April 2007 shooting deaths of 32 people at Virginia Tech by a disturbed student.

Sheriffs and other local constitutional officers would lose about $270.5 million over the two years, and local police department funding would be cut by about $73 million.

State employees would forgo pay raises for two years and be required to make payments toward their own pensions for the first time since 1983. The retirement age for new hires would jump from age 50 to 55, and the state would eliminate 664 jobs.

The tax increase is not the only effort to increase revenue. Kaine proposed ending the dealer discount, a sliver of the state sales tax retailers keep for collecting and remitting the tax, adding $60 million to $70 million annually.

He proposed leasing 1,000 state prison beds to house out-of-state inmates to raise $19.8 million.

And, if approved, the price of a bottle of liquor will increase by 2 percent at Virginia’s state-owned liquor stores.

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