Legislature to Focus on Tax Cut
By Mike Allen
Washington Post Staff Writer
Sunday, January 11, 1998; Page B01
Aides to Gilmore, a Republican, say that because of a web of conflicting tax laws in cities and counties across the state, more than 50 people are working around the clock in state government and on his transition team to untangle the logistics and financing of his plan.
Arriving in Abingdon last night for his black-tie Southwest Virginia Ball, which kicked off a week of inaugural activities, Gilmore said Virginians will get the tax relief he repeatedly promised during his campaign.
"We are going to eliminate the car tax," he said with a triumphant smile. "We always knew it was a complicated thing to do, but it's just simply the right thing to do. The better information we get, the better a plan we can devise."
Gilmore's bill to eliminate the property tax on most cars and trucks over the next five years is widely expected to dominate the two-month legislative session, but now Gilmore aides say the "No Car Tax!" bill won't be ready until at least the second week. During the session, increasingly powerful Republicans also plan to push a variety of longtime goals, including additional restrictions on abortion for teenagers.
Democrats, who have complained that Gilmore has underestimated the cost of his tax cut and who initially vowed to block it in the legislature, won't put up much of a fight. They have been ever more submissive to the idea since Gilmore's 13-percentage-point win over Democrat Donald S. Beyer Jr. in November, and they figure they'll vote for the tax cut and let Republicans take the fall if Virginia winds up choking on the five-year plan's estimated cost of up to $3 billion.
"It's seldom that the outcome of an election has been so obviously based on one issue," said Sen. Mary Margaret Whipple (D-Arlington). Like other Democrats, she says she will sign on to a plan to cut the locally collected car tax as long as it includes guarantees that the state will reimburse cities and counties for lost tax revenue. "That's what the voters want and expect," she said.
But, as Gilmore's number crunchers are learning, drawing up the tax-cut legislation won't be easy.
At the Department of Motor Vehicles, programmers are building a new database of the 5.7 million vehicles registered in the state in an effort to determine the value of the cars and trucks in each locality -- a feat that has never been attempted.
On Thursday night, at the latest in a long series of "car-tax meetings" at Gilmore's workshop on the 15th floor of an office tower near Capitol Square, aides presented drafts of about a dozen possibilities for cutting the car tax.
"He asked for more," said Dick Leggitt, a Gilmore strategist. "The governor-elect has a very deliberative style."
Gilmore's staff says he has several points on which he will not compromise: He wants the tax relief to be retroactive to Jan. 1 of this year. He wants to cut the car tax without increasing any other tax. He wants to eliminate the car tax on the first $20,000 of the value of personal vehicles. And he wants to phase in the tax cut over five years -- not do it sooner, as urged by some Democrats, who want Republicans to have to face more of the tax cut's budget consequences before Gilmore leaves office in 2002.
The plan Gilmore submits to the legislature will have some mechanical differences from the promise he made during his campaign for governor. But its impact on the pocketbook of Virginia taxpayers is likely to be very much what he proposed.
"Both Republicans and Democrats have heard the voice of the people on this," a chipper Gilmore said in an interview last week.
The wrinkles in his plan arose because each of Virginia's 135 cities and counties taxes vehicles at different rates using different schedules, and the localities have conflicting ways of billing taxpayers and determining vehicles' value.
"It's the biggest hodgepodge anyone has ever seen," Leggitt said. "The governor-elect is looking for a simplified formula so taxpayers will understand what they're getting and when, and to minimize the problems for the localities."
A study by the Weldon Cooper Center for Public Service, at the University of Virginia, found that localities collect the tax based on trade-in value, loan value, retail value, finance value, wholesale value, price-list value or book value.
The personal property tax was born of a Colonial protest. The tax, which then covered cattle and sheep, replaced the poll tax in 1654.
In the fall, the personal property tax became a symbol of tyranny as Gilmore traversed the state, repeating tirelessly: "I'm Jim Gilmore. I will cut the car tax. You can count on it."
Gilmore's plan called for making the first $1,500 of a vehicle's value tax-free during the first year of his program. In the second year, the exemption would rise to $3,000. It would rise to $5,000 in the third year, $12,000 in the fourth year and $20,000 in the fifth year.
His advisers estimated that 90 percent of vehicles in the state have a value estimated at less than $20,000, so the tax effectively would be eliminated for most residents. Gilmore promised that the money would be refunded to cities and counties "dollar for dollar," using the fruits of Virginia's economic growth, which has pushed up state tax revenue.
During the campaign, a radio ad starring Jimmy Dean, the country-music star and sausage king, said Gilmore will cut the car tax "or die trying."
With Democrats now seemingly in line, he probably won't have to.
Democratic lawmakers initially wanted to cram the plan down Gilmore's throat in two years instead of the gentler phaseout he has proposed. That would have forced him to make deep cuts in spending.
Then Democrats said they wanted to increase the state sales tax as a trade-off for passing the tax cut or barter for more education funding. Later, they said they would pass the plan but would made a big public fuss about the programs that would be hurt.
Now they just want to know where to sign.
The Senate Democratic leader, Richard L. Saslaw (Fairfax), even says that if an amendment to the state constitution is needed to carry out the tax cut, he'll introduce it.
"From a political standpoint, I want to get this out of the way. Let's get it over with," Saslaw said. "If it causes enormous problems in later years, that will be the Republicans' problem."
Del. Vincent F. Callahan Jr. (R-Fairfax), who is being considered for the plum job of introducing Gilmore's bill when it's ready, said that Democrats have "their backs against the wall" and that he believes no major changes will be made to Gilmore's basic plan.
"There will be a lot of speculation about revenue estimates and costs and details," Callahan said. "But the bottom line is that anyone who votes against this will be in severe political jeopardy."
Gilmore will be inaugurated at noon Saturday on the steps of the state Capitol. Bills must be submitted by Jan. 26 to be considered in this winter's session of the state legislature, which will last 60 days, beginning Wednesday and ending March 14.
Although the car-tax debate seems certain to dominate the legislative session, organizational wrangling will consume the first several days. This is particularly true in the 100-member House, where Republicans could make a play for power sharing -- if not unprecedented control if they win three special elections Tuesday to fill open seats.
Conservatives plan to continue their drive for a parental-rights amendment to the state constitution and want to require teenagers to get permission from their parents before getting an abortion -- not just notify them, as now required.
Lawmakers will debate the deregulation of electric utilities in the state, and Gilmore has promised to push for more funding for George Mason University in Fairfax County. The money fights should be few, though, because George Allen (R), the outgoing governor, has proposed a two-year, $39.8 billion budget that includes goodies for just about every imaginable constituency.
Allen took Gilmore at his campaign word that the car tax would cost $260 million in the first two years, and that was all he put in his last budget proposal to the legislature.
Now Gilmore figures the tab for cutting the car tax will run $100 million or more beyond that. But his aides say that state revenue is growing faster than originally projected and that they believe it will make up for most of the shortfall.
"It'll cost more than we thought, but less than the Democrats say," Leggitt said.
Estimates by the Senate Finance Committee staff indicate that Gilmore could still be understating the cost of the tax cut. A study by the committee projected the cost at $520 million over two years.
Other hurdles remain. Localities have to figure out how to prevent people from declaring business vehicles to be personal vehicles so they will be eligible for the cut. And some counties collect personal property tax in May, meaning that refunds might be due to people who will pay their annual tax before the tax-cut bill is signed into law.
Gilmore plans to juice public support for his tax cut with a political action committee, The Car Tax PAC, funded by profits from this week's inaugural activities. The group plans to hold tax-cut promotions throughout the state, targeting the districts of any wavering lawmakers.
Originally, television advertising was being considered. With the bipartisan support that has emerged for Gilmore's idea, however, the group will not have to be as aggressive as organizers had planned.
"This was designed when we thought this was going to be a no-holds-barred, blood-on-the-floor fight," Leggitt said. "We no longer see it in that light."
© Copyright 1998 The Washington Post Company
