Thursday, May 20, 2004

Some Virginia lawmakers who last month voted to cap the state’s popular car-tax phaseout are now flip-flopping on the issue in time to gear up for elections next year.

Several lawmakers said privately they would support reversing the plan that indefinitely caps the amount the state reimburses localities — about $950 million a year — for revenue lost under the car-tax cut. As a result, Virginia vehicle owners are likely to pay higher car-tax bills beginning in 2006.

Publicly, several lawmakers say they voted for the car tax cap plan only to get a new two-year state budget passed. Sources say some lawmakers are backpedaling on the issue after hearing from frustrated constituents.

Meanwhile, reports this week from the state finance department about an unexpected budget surplus are likely to stoke calls for continuing the phaseout of the car tax.

Lawmakers who voted for the cap but would support its reversal next year include Sen. D. Nick Rerras, Norfolk Republican; and Delegates Riley E. Ingram, Hopewell Republican; Kenneth R. Plum and Mark D. Sickles, both Fairfax Democrats.

Former Gov. James S. Gilmore III, a Republican who was elected in 1997 on the promise to eliminate the car tax, said “it’s easy now” for lawmakers to flip-flop. Since the vote last month, Mr. Gilmore recorded a telephone message asking voters to share with him their thoughts about the cap.

“The damage to the public has been done,” he said. “The public is pretty angry about this. They consider it a breach of promise.”

Many lawmakers won their seats by supporting the phaseout of the car tax.

Capping the car-tax relief program amounts to a tax increase, particularly for car owners in Northern Virginia, said Robert D. Holsworth, director of the School of Government and Public Affairs at Virginia Commonwealth University. So, lawmakers are rethinking their decision as the 2005 election for all 100 House delegates draws near, Mr. Holsworth said. Senators will not face voters until 2007.

“The car tax was the single most powerful issue-oriented campaign we’ve seen in the last 50 years in Virginia,” Mr. Holsworth said. “Some people may be having second thoughts about what they have just done. It was a bit of a gamble, particularly for Northern Virginia legislators who voted for it.”

Last month, the House approved the cap 51-45 and the Senate 31-8. Republicans control both chambers.

Under the cap, car owners will continue to pay 30 percent of their tax bills for at least two years. Those bills are likely to go up as more people buy more expensive cars and localities continue to get the same amount of money from the state.

Delegate Vincent F. Callahan Jr., Fairfax Republican, who voted against the cap, said he wants it reversed. Mr. Callahan said he expects revenue to grow and that the state should honor its promise to give its residents car-tax relief.

“We can revisit that next year as the economy improves,” said Mr. Callahan, chairman of the House Appropriations Committee. “I hope we will.”

Sen. John H. Chichester, Stafford Republican who voted for the cap, said he would fight such a bill unless more taxes are raised to generate the revenue needed to fund a full phaseout of the car tax.

“I don’t see how we could possibly approve something like that,” said Mr. Chichester, chairman of the Senate Finance Committee. “I don’t have any idea how we would reverse what we have just done, unless he wants to put some revenue in its place, unless he wants to impose an income tax.”

Mr. Chichester and Gov. Mark Warner each initially proposed to phase out the car tax. However, their plans were built on raising the income tax, a measure the full legislature did not support. Mr. Chichester’s plan would have phased out the car tax fully by 2005 and Mr. Warner’s plan would have done it by 2008.

Other lawmakers said the economy will play a factor in the decision on whether to reverse the cap.

“If the revenue picture is bright, and there are signs that we are having the beginnings of a recovery, yes, I would support that,” Mr. Sickles said. “The primary reason I voted for the cap was to secure the AAA bond rating.”

Rating agencies had said that the growing car-tax reimbursement figure — expected to increase by $150 million each year — was bad budgeting.

Mr. Rerras said he was open to the idea, depending on the state of the economy.

“I think that’s something we should take a look at,” he said. “It was a promise made. We’ve already frozen it for several years at 70 [percent], and I’m certainly open to moving it on to 100 percent.”

Mr. Ingram said he continues to support full relief for drivers. “I do hope we can keep this open and look at this down the road — next year and the year after next also,” he said. “I’d like to revisit it again, if at all possible. I personally don’t care about an election year.”

Mr. Plum said he favored Mr. Warner’s initial plan for phasing out the car tax, but voted for the cap to end the standoff.

“The issue is far from resolved, but we had to do that to finish our business,” he said. “We were caught 115 days in a special session with a reality that we had to do something to solve our long-term systemic budget problem. The freeze offered an immediate solution.”

However, Sen. Kenneth W. Stolle, Virginia Beach Republican, said reversing the cap will not fare well in the Senate and that taxpayers won’t even notice a difference until at least 2006. “It’s not like anyone is losing any money for the next two years,” he said.

Warner spokeswoman Ellen Qualls said the governor supported the cap to address the long-term fiscal stability that credit-rating agencies were looking for in the state budget.

“Because it’s a state spending item to reimburse local governments to cut their tax, Virginia simply has to have a responsible plan to pay that bill in the future,” Miss Qualls said.

Delegate Harvey B. Morgan said he “rues the day” the state got into the car-tax relief program. “I would absolutely oppose reversing the cap,” the Gloucester Republican said. “At least freezing it is stopping the bleeding.”

Mr. Gilmore had pledged to eliminate 100 percent of the car tax by 2002, but the program was frozen at 70 percent in 2001 because it proved too costly.

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