Dollars and Sense

Tuesday, October 11, 2005

VIRGINIA'S FINANCES, on life support four years ago, have staged a robust recovery thanks to smart leadership in Richmond and a stronger national and regional economy. A key question in the race for governor is which candidate would be the better steward of the state's hard-won financial health. The clear answer is Lt. Gov. Timothy M. Kaine, the Democratic candidate.

The essential difference between Mr. Kaine and his main rival, Jerry W. Kilgore, a Republican and former attorney general, is that Mr. Kaine backed a wide-ranging overhaul and increase in state taxes last year and Mr. Kilgore opposed it. That was a defining event, forcing officials to choose between knee-jerk anti-tax orthodoxy and moderate pragmatism that would safeguard Virginia's reputation for financial probity. Mr. Kaine chose wisely, supporting Gov. Mark R. Warner in what looked like a serious political gamble. Mr. Kilgore blew it, even as plenty of lawmakers from his party got it right.

It's easy, now that Virginia -- like many other states -- is running a substantial budget surplus, to lose sight of the importance of that decision. Republicans who opposed the tax overhaul point to the surplus and insist that raising taxes last year was unnecessary. But those same Republicans, including Mr. Kilgore, are only too happy to spend the new revenue whose collection they so bitterly opposed: on public schools, public safety and, recently, as part of an $848 million transportation package. None of them, including Mr. Kilgore, publicly dispute the fact that Virginia's top-notch AAA bond rating, in place for more than half a century, was safeguarded by the 2004 tax overhaul. And neither Mr. Kilgore nor most of his GOP colleagues appear to be planning a serious move to roll back the tax package, despite occasional wistful talk to the contrary. Their position amounts to plain cynicism.

That history should make Virginia voters more confident in Mr. Kaine than in Mr. Kilgore as a potential steward of the state's finances. But it is not the end of the story. For in other budget and fiscal areas, Mr. Kilgore appears not just wrongheaded or ill-informed; in fact, he is a radical.

Mr. Kilgore says he would propose an amendment to the state constitution requiring that voters approve, via referendum, any increase in state sales, income or gas taxes. Not only is this an abdication of leadership -- governors and lawmakers are elected to make these decisions, not hand off tough calls to statewide votes -- it is also a recipe for disaster that would tie the state's hands in the inevitable economic downturns. Of course, Mr. Kilgore knows this, for his proposed constitutional amendment comes with an asterisk: In an emergency, he would allow the governor, with the backing of two-thirds of each house of the General Assembly, to raise taxes temporarily, for a year. And what if the economic slump lasted for more than a year? That's not in Mr. Kilgore's playbook; he leaves Virginians to guess that he would simply choke off public schools, health programs, social services and public safety.

Mr. Kilgore's radicalism extends to his plan for local governments and property taxes. In disregard of the free market, he would impose a 5 percent cap on annual real estate assessment increases. Since assessments would catch up to reality only after the sale of a home, the result would be neighbors living in comparable homes but paying vastly different property taxes, depending on how long they had lived there. If Mr. Kilgore's plan deprived some local goverments of the money they needed for public schools and other services, they would have to raise property tax rates, which in some places might be politically difficult or impossible.

Both Mr. Kaine and Mr. Kilgore have proposed various spending programs without explaining how they would be paid for, but in Mr. Kilgore's case the hypocrisy is more extreme. The benefits, bonuses and tax credits he promises amount to financial fantasy. Taking him at his word, he would spend profligately and strangle the state's supply of revenue. Mr. Kaine, by contrast, seems to have the right instincts, despite the usual overpromising. By backing Mr. Warner's tax overhaul last year, he displayed responsibility and a measure of political courage, both qualities that would serve him well in office.


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