By Ellen Nakashima and Spencer S. Hsu
Washington Post Staff Writers
Wednesday, February 18, 1998; Page B01

RICHMOND, Feb. 17 – Virginia legislators today set up a showdown this week over competing forms of tax relief: the car-tax cut that drove Gov. James S. Gilmore III (R) to victory in November and an upstart Democratic plan to slash the sales tax on food.

Although budget analysts, lawmakers and Gilmore generally agree that Virginia can afford only one of the tax cuts as now proposed, the Senate Finance Committee approved both plans today. So instead of Gilmore's tax cut getting a free ride through the legislature, the governor and his troops will have to defend it on the floor of the Senate – and later, maybe the House – against a Democratic plan that even some Republicans say is more fair to low-income and rural Virginians who do not have large car-tax bills.

This evening, both tax plans failed to pass the House Finance Committee on party-line, 12 to 12 votes. Unless the plans resurface in House bills this week, the divided House will wait for the GOP-led Senate to send it one or both tax-cut proposals.

Although most lawmakers and analysts continue to believe that a car-tax cut is inevitable, many now also believe that Gilmore – whose election mandate to cut the tax is barely 3 ½ months old – may have to fight to get it.

"Democrats are . . . not rolling over and playing dead," said American University political scientist Mark J. Rozell. "They're trying to extract at least some concessions. . . . It's a way of showing they're still relevant to the process."

So far, both tax-cut measures have lived in part because lawmakers in both parties are reluctant to have a vote against tax relief on their records for the 1999 elections. The Senate finance panel that today cleared Gilmore's five-year, $2.8 billion program to begin phasing out the car tax did so with the aid of five Democrats; the six-year, $800 million Democratic proposal to cut the state's 4.5 percent food sales tax passed the same committee with the support of three Republicans.

Sen. Warren E. Barry (R-Fairfax), a finance panel member who voted for both tax cuts, said he did so because he believes that the full Senate should have a choice on tax relief.

Although he supports Gilmore's call to cut the car tax, "I've run consistently over the years in favor of cutting the sales tax on food," said Barry, reflecting the difficult position in which the Democratic plan has placed many Republicans. "My tendency is to vote for it."

The brewing tax battle highlighted the midpoint of the General Assembly's 60-day session, as lawmakers plowed through a mound of bills to meet a deadline to act on all legislation.

Conservative Republicans scored a breakthrough victory as the House of Delegates approved a ban on a form of late-term abortion.

Democrats also recorded gains, passing legislation in the Senate to extend health insurance to 104,000 children of low-income working parents. The Senate followed the House in approving Democratic plans to restore state-mandated sex education as well as guidance counselors in elementary schools. The House and Senate also advanced anti-pollution bills to regulate poultry farms and garbage barges for the first time.

The political and fiscal stakes in the tax-cut debate could hardly be higher. Gilmore, who campaigned on a smaller-government platform, has bet the success of his administration's first year on passage of the car-tax cut.

Democrats, reeling from a GOP sweep of the three statewide offices and legislative elections that gave Republicans an unprecedented share of power in the General Assembly, are struggling to redefine their party as taxpayer-friendly while shielding state programs.

House Democrats today said they hope to use the food-tax cut as political leverage to bring the administration to the bargaining table over the car-tax cut.

"It's a high-stakes poker game they're playing," said Democratic leader C. Richard Cranwell (Roanoke), who today led Democrats on the House finance panel in their vote against the car-tax cut. Cranwell vowed to ensure passage of a tax cut that would be fair across regional and income lines, while not jeopardizing the state budget.

Gilmore blasted Democratic attempts to force a compromise on tax relief. He hailed the Senate finance panel vote for his plan and repeated his charge that the food-tax plan is half-baked.

"It's a hastily put-together plan . . . to try to derail genuine and honest tax relief," the governor told reporters in his Capitol conference room. At the same time, Gilmore – whose cautious style allows for ambiguity – left himself some wiggle room when pressed on whether he would accept a combination of food- and car-tax relief.

"I'm always in favor of the elimination of taxes," he said. "But [the Democrats] have got to put together a better plan than has been offered so far."

Asked whether he thought the state could afford to pay for both car- and food-tax relief, he said, "I don't think so."

Gilmore today pushed the GOP campaign machinery into high gear against Democrats opposing his tax cut. Republicans have targeted the districts of nine key lawmakers, and a GOP phone bank dialed 12,000 calls an hour Monday to try to energize voter support of the car-tax cut.

"Powerful, big government groups and liberal politicians are urging [Del. Robert D. Hull D-Fairfax] to vote to kill our tax-cut plan," a woman's voice said in one message before giving Hull's Richmond phone number.

"It seems like the campaign [for governor] never ended," Hull said.

Democratic legislators from Northern Virginia, where households often have several expensive cars, have been inundated with calls.

Del. James M. Scott (D-Fairfax) said his office has received 110 calls, 90 in favor of eliminating the tax, but said he was secure in voting to cut the food tax.

"We're elected to make decisions, right?" Scott asked.

A repeal of the sales tax on food, a staple of populist rhetoric in Virginia since the 1970s, was passed by the House in 1981, only to be killed by the Senate.

But its profile has climbed this year as Democrats scrambled for a popular alternative tax cut that would appeal to all income levels. The levy, which sends 3.5 cents on every dollar sold to the state and 1 cent to localities, raises $350 million a year from food and directs $50 million to Virginia's road construction fund and the rest into the general fund.

"Clearly there are members who would like very much to vote for both of these measures, but they are mutually exclusive," said Sen. John H. Chichester (R-Stafford), a sponsor of Gilmore's tax-cut bill. "If both were to pass, it would force cuts to spending later."

Senate President pro tempore Stanley C. Walker (D-Norfolk) said the food-tax cut "has a chance."

"There's a feeling that you'd like to see the car tax toned down somewhat," Walker said. "There's enough votes [that] you could eventually get the car tax [cut], but there's still some movement to change it, because people are genuinely concerned about the cost of it."

In other action today, the Senate gutted a plan to ban cigarette vending machines by 2001 and merely restricted their placement.

The House approved a bill to give the state the power to regulate water discharges by poultry farms into the Chesapeake Bay and its tributaries.