Excerpts from James S. Gilmore III's State of the Commonwealth address.
$500 Million Sought to Lower Tax
 Gov. James S. Gilmore III (right) takes the oath of office from Chief Justice Harry L. Carrico of the Supreme Court of Virginia. (By Robert A. Reeder–The Washington Post) |
By Spencer S. Hsu
and Ellen Nakashima
Post Staff Writers
Friday, January 23, 1998;
Page B01
RICHMOND, Jan. 22 – Virginia Gov. James S. Gilmore III will ask the General Assembly on Friday for nearly $500 million to cut the car tax by 30 percent by 1999, a plan that would cost nearly twice as much as he forecast during the fall campaign.
The Republican's proposal, which lawmakers in both parties say is headed for approval despite its escalating cost, initially would give less relief to owners of cars valued at less than $10,000 than Gilmore had promised.
Despite some estimates that his five-year plan to phase out the tax on cars valued at as much as $20,000 eventually could cost $1.3 billion a year, the governor maintains that Virginia will be able to make up the revenue loss through economic growth.
Gilmore's plan calls for the state to send vehicle owners special vouchers during the next two years that, in effect, would be coupons good for 15 percent off this year's car-tax payments and 30 percent off next year's for the first $20,000 of a vehicle's value. Vehicle owners would mail the vouchers along with their reduced tax payments to county and city tax collectors, whom the state treasury would reimburse for the value of the vouchers.
The governor has decided that because of the many different ways Virginia localities assess the tax, it would be easier to phase it out on a percentage basis – 15 percent the first year, 30 percent the second, then 50, 70 and 100 percent in subsequent years – rather than exempt fixed dollar amounts of a car's value each year.
As a result, those with less expensive cars would pay the tax longer than Gilmore promised during the campaign, while those with expensive cars would see more immediate relief.
For example, a person with a $3,000 car – who would have had his tax eliminated in the second year of Gilmore's original proposal – now will continue to pay 70 percent of his tax and will pay at least some tax until the fifth year of Gilmore's plan. But someone with a $30,000 car who would have been taxed on $27,000 of its value in the second year of Gilmore's original plan now would be taxed on only $24,000 of its value for that year.
GOP lawmakers advised of Gilmore's $493 million, two-year plan said today that the details were not so important as the idea of Gilmore keeping his promise to voters who gave him a mandate to cut the tax.
"The citizens of the Commonwealth of Virginia have spoken, and I think we have to honor what the citizens want," said Del. Harry J. Parrish (R-Manassas), co-chairman of the House Finance Committee, who will head a car-tax subcommittee with Democratic leader C. Richard Cranwell (Roanoke).
Several Democrats who have acknowledged that Gilmore's political capital from the election means likely passage of a car-tax cut nevertheless said that the rising cost could lead to tough changes in the budget that was proposed by outgoing Gov. George Allen. Based on Gilmore's early estimates, Allen's two-year, $40 billion budget set aside only $260 million for a car-tax cut. Gilmore's aides acknowledged they will propose minor cuts in Allen's budget Friday.
"At least now we have a definition of the battle lines," said Sen. Joseph V. Gartlan Jr. (D-Fairfax). "Putting that amount of money into that program is inevitably going to conflict with some high priorities under the Allen budget, including mental health, higher education and other things."
Gilmore also announced today that he will make good on his campaign promise to hire 2,000 new elementary school teachers by 2000; Allen already had provided for 1,000 new teachers in the two-year budget he left behind. Gilmore added $35.1 million to the $23.1 million proposed by Allen.
And a week after a turbulent power struggle in the House gave Republicans unprecedented powers there, Senate Republicans gained a committee chairmanship as a result of a special election Tuesday that gave them an outright majority of 21-19 in the 40-seat chamber.
Republicans forced concessions in thethe power-sharing agreement with Democrats after Tuesday's election of William C. Mims (Loudoun) to a seat that had been vacated by a Democrat entitled the GOP to the additional chairmanship. Republicans now control five of the Senate's 10 committees and share leadership of a sixth.
Democrats, whipped in the fall elections, have signaled they will not fight the basic elements of Gilmore's car-tax cut. But as Gartlan said, there are likely to be debates about what parts of the budget to trim to make room for the tax cut.
Rural lawmakers have said they will object to the idea that the tax cut mostly benefits wealthy areas such as Northern Virginia, where car values and tax rates are highest.
Under Gilmore's two-year plan, the exact value of the 15 percent and 30 percent coupons would vary greatly.
In Fairfax County, for example, where the tax rate is $4.57 per $100 of assessed value and the average car is worth $7,500, the typical owner would get a coupon worth $51.41 for 1998 to use in paying a $343 bill. The 1999 coupon would be worth $102.82.
Typical coupon values would be much less in Tazewell County in far Southwest Virginia, where the tax rate is $2 per $100 of assessed value and the average car is worth $5,500. For a typical Tazewell car owner, the 1998 coupon would be worth $16.50 toward a $110 bill; the 1999 coupon would be worth $33.
"The money leaves the areas that need it the most and goes to the areas that need it the least," said Sen. Jackson E. Reasor Jr. (D-Tazewell). "That's what irks me the most."
Del. Vincent F. Callahan Jr. (R-Fairfax), the House Appropriations co-chairman who will carry Gilmore's car-tax bill in that chamber, countered that "if someone in Tazewell County buys a $50,000 Cadillac, they will get reimbursed just like the person with a $50,000 Cadillac in Fairfax County."
© Copyright 1998 The Washington Post Company
