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Tax-Relief, Transportation Proposals Essentially Killed This Year

By Sandhya Somashekhar and Tim Craig
Washington Post Staff Writers
Tuesday, February 26, 2008

RICHMOND, Feb. 25 -- The Virginia Senate defeated a tax-relief proposal Monday that would have given homeowners as much as a 20 percent break on their real estate assessments.

A committee of the House of Delegates, meanwhile, rejected a proposal to raise the state's gasoline tax by a nickel a gallon over the next five years, effectively ending plans to raise more money for transportation this year.

The votes probably marked the end for two key issues before the General Assembly for this year's 60-day session, which entered its final two weeks Monday.

The homestead exemption was expected to be popular in Northern Virginia, where tax bills have more than doubled for some residents in the past several years. If enacted, it could have saved the owner of a typical Northern Virginia home hundreds of dollars a year. But the business community, including the Virginia Chamber of Commerce, lobbied heavily against the bill because of fears that it would shift the tax burden to the commercial sector.

Last year, the House and Senate overwhelmingly endorsed the proposal, which required approval in two legislative sessions to become law.

The bill was one of Gov. Timothy M. Kaine's (D) priorities, but Democratic Sens. Charles J. Colgan (Prince William) and Phillip P. Puckett (Russell) joined all 19 Republicans in their chamber to defeat the proposal for the year.

Senate Democrats accused Republicans of backing down because of an intense lobbying blitz by businesses. As recently as last month, Senate Republicans had identified the proposal as one of their top priorities.

"I think they decided to respond to the wishes of the commercial property tax owners," Sen. Mary Margaret Whipple (D-Arlington) said.

Republicans in the GOP-led House, which unanimously passed the bill, also condemned their counterparts in the Senate, saying they voted for the bill last year because it was an election year but succumbed to pressure this year.

"They don't have to run for four more years," said Del. David B. Albo (R-Fairfax), the sponsor of one of the bills, noting that delegates are up for election every two years while senators are up every four years.

But Senate Republicans said it was a flawed bill that needed more scrutiny. In particular, they said, the language could be construed to let only certain neighborhoods receive the exemption. In addition, they said, the business community this year highlighted the possibility that commercial taxes would go up to compensate for the loss in residential taxes.

Because it requires a change to the state constitution, the bill needed to pass the General Assembly twice before it could be put on the ballot in November. If voters had approved the change, it would have taken effect in July 2009. Senate Republicans said they plan to revisit their decision next year if the bill's problems can be fixed.

The gas tax increase killed Monday would have helped pay for road maintenance.

The 14 to 6 vote by the Republican-controlled Finance Committee means a projected $360 million deficit in the part of the state transportation budget used to maintain roads probably will worsen in coming years. To make up for the shortfall, transportation officials have said they will have to divert money from highway construction programs.

Senate Majority Leader Richard L. Saslaw (D-Fairfax), the sponsor of the gas tax proposal, said the state will be without highway construction funds by 2016 unless the General Assembly acts.

"Sooner or later, you all are going to have to deal with this problem," Saslaw said.

But the two top Democrats in the House, Del. Brian J. Moran (Alexandria) and Minority Leader Ward L. Armstrong (Henry), helped to defeat Saslaw's proposal by voting against it in committee.

Saslaw's proposal would have raised the state's gas tax of 17.5 cents a gallon, last raised in 1986, by a penny a year for the next five years. The Senate approved the plan, which would have raised $260 million annually when fully phased in.

By failing to enact a gas tax increase, legislators have decided they won't be replacing the estimated $65 million in revenue the state would have collected from the abusive-driver fees, which the House and Senate voted this year to repeal.

In arguing against a gas tax proposal, Republicans on the Finance Committee suggested that the federal government could be getting ready to raise the federal gas tax. They also noted that regional taxing authorities in Northern Virginia and Hampton Roads, which were enacted along with the abusive-driver fees in a transportation deal last year, are just starting to go into effect.

"We did act last year, and we need to let it work, and make sure it does, before we act on this," Del. Ben L. Cline (R-Rockbridge) said.

But transportation advocates, backed by contractors, argued before the Finance Committee that last year's transportation deal largely failed to address highway maintenance costs.

Bob Chase, director of the Northern Virginia Transportation Alliance, said most motorists wouldn't mind paying a few extra cents in gas tax if it meant safer roads.

"What is 50 cents a month compared to the cost of a possible front-end alignment" for your car? Chase asked.

Moran, a likely Democratic candidate for governor next year, said he voted against the increase because it failed to garner support from Republicans. "Any effort to raise taxes has to be bipartisan," Moran said. "This was an opportunity for rural legislators to take the lead, and they chose not to."

Moran's decision could become an issue in next year's Democratic primary for governor. Sen. R. Creigh Deeds (D-Bath), who also is running for governor, voted for Saslaw's bill in the Senate.

Staff writer Anita Kumar contributed to this report.

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