"For us, it all boils down to a question of trust," Virginia House Speaker William J. Howell (R-Stafford) said at a news conference last week. Interesting word, "trust" -- especially in the context of the car tax cut, which Howell and his Republican colleagues in the House of Delegates vowed to once again pursue.
Let's replay the bidding.
On May 8, 1997, when gubernatorial candidate Jim Gilmore first rolled out his successful "end the car tax" ploy, he promised that economic growth would cover the lost revenue and that it would never exceed $650 million a year. Tax relief would be phased in over a period of years and "not require any cuts from existing programs," he said. Sixteen days after Gilmore won office, he announced that, gee, the car tax cut was going to cost more than previously advertised. A lot more.
The car tax is a local tax, not a state tax. In 1926 Gov. Harry F. Byrd Sr. made tax segregation a hallmark of his administration. Taxes on personal property were reserved for the localities; the rest -- primarily the income tax -- would be kept for the state. How, then, was the state to end a tax that had been set aside for local governments? With a contrivance, that's how. In 1998 the General Assembly chose not to end the car tax at all but to pay the bill itself. The local property tax on cars in Virginia would function as before, except that the state government -- thanks to a fat line item in the budget -- would cover a portion of the tax (up to the first $20,000 of a car's value) that otherwise would be paid by car owners.
Some wiser heads thought this whole arrangement a bit nuts and fraught with future fiscal peril and said so. That prompted then-Gov. Gilmore to issue more reassurances in a Richmond speech on Feb. 5, 1998, before members of the Virginia Municipal League and the Virginia Association of Counties. Gilmore laid out the mechanics of his planned five-year car tax phase-out (otherwise known as backloading). It would be "simple and fair," he said, notably declining to estimate the ultimate cost.
The first two years of the car tax cut went smoothly. So much money was flowing in that Gilmore could easily cover the early, lower levels of the car tax cut phase-out while simultaneously jacking up spending for education. It was a swell arrangement. Until 2000. That's when the state economy -- which, in case you don't know, is measured by a large thermometer planted somewhere in central Fairfax County -- skidded off the edge, a victim of the high-tech industry's declining fortunes. State revenue plummeted.
Gilmore ignored the declining revenue, disavowed his promises and pursued the next level of the car tax phase-out in the 2001 legislative session. The House of Delegates said okay, the State Senate said no way -- and, for the first time in memory, the two legislative bodies couldn't agree on the budget. The fiscal and political debacle that followed ushered in Democrat Mark Warner, elected as governor in 2001 on the promise of straightening out the state's books. He spent his first three years in office doing so. Last year's hard-won agreement capped the state's commitment to the car tax at $950 million a year, and a momentary calm settled upon the commonwealth.
Now, here we go again. The House Republican leadership proposed last week to once again backload the cost of further car tax cuts over a period of years. (Think of it as the political equivalent of a payday loan. You get all the political credit now and worry about the financial consequences later.) And what will the cost be? The Republican leaders had the numbers in their back pocket but declined to produce them. Here they are: If you spread the remaining portion of the car tax cut over the next eight years, the cost to Virginia would rise from $911 million in fiscal 2006 to $1.8 billion in fiscal 2013. End the $20,000 value limitation -- there are some mutterings to that effect -- and the cost to the state treasury would be just shy of $2 billion.
Trust? Virginia could be looking at a $2 billion annual expenditure to cover a campaign promise that long ago went out of control.
You can trust this: The folks pushing this deal don't give a hoot about the numbers so long as they can once more sing "end the car tax" into November.
gcmorse@cox.net
