Va. Senate Scales Back Car-Tax Cut

RICHMOND, Feb. 19 – Virginia's Republican-led Senate today abruptly set aside Gov. James S. Gilmore III's centerpiece plan to phase out the car tax and approved a scaled-back version that eventually could cost up to 20 percent less than the $2.8 billion program the governor wants.

The move by senators in his own party was a rebuff to Gilmore, whose "No Car Tax!" campaign last fall helped the GOP sweep all three statewide offices and gain an unprecedented share of power in the legislature.

But with Democrats and an increasing number of Republicans fretting over whether the escalating cost of Gilmore's program would drain future budgets for schools and other initiatives, the GOP wall of support for the governor's bill began to crumble.

By a 31 to 9 vote, senators approved a five-year plan to phase out the tax on the first $15,000 of a vehicle's value, instead of the $20,000 phaseout Gilmore proposed. They also imposed a cap on the tax cut, limiting it to 7.75 percent of the state's general fund when it would be fully phased in.

The GOP, which holds 21 of the 40 Senate seats, killed on a party-line vote an alternative tax cut, proposed by Democrats, to eliminate the state's 4.5 percent sales tax on food.

The result was a bittersweet day for Gilmore: His push to cut the tax on cars and trucks cleared a major hurdle, and most lawmakers believe a version of it eventually will pass the legislature. But just 3 1/2 months after riding his car-tax cut plan to a landslide election victory, the momentum of that moment seemed diminished, as many fellow Republicans in the Senate called his program fiscally irresponsible.

"The governor promised many things during the campaign, and if he had his way this piece of paper before us would still be that way," Sen. Malfourd W. "Bo" Trumbo (R-Botetourt) said during a three-hour debate in which nearly all 40 senators spoke. "But . . . that ain't going to happen. . . . What was first proposed and promised to the commonwealth, in our eyes, was not responsible."

Sen. Warren E. Barry, a Fairfax Republican, said that he and other lawmakers became uneasy with Gilmore's plan after realizing its escalating cost several years from now.

"People started to focus on the open-ended nature of this thing," Barry said. "After four years, you're looking at $11.1 billion in the general fund, and $1.1 billion of it is going to go to this one source. What's it going to be eight years from now?"

After a day in which his aides showed obvious displeasure with the direction of the Senate debate, Gilmore tonight put a positive spin on the day, focusing on the idea that some form of car-tax relief had advanced.

"I applaud today's Senate action that will provide car-tax relief to Virginia's working families," Gilmore said in a statement. "I will continue working to provide tax relief . . . up to the first $20,000 of [vehicles'] assessed value. I remain committed to providing the maximum tax relief possible."

Democrats, meanwhile, hailed the rejection of Gilmore's plan by Senate Republicans as confirmation of months of lonely Democratic criticism. Gilmore's anti-car-tax message resonated strongly with voters, and only recently have Democrats found a public audience for their claims that Gilmore's plan would gut the state's budget and disproportionately benefit owners of luxury cars in high-tax regions.

"Reality is setting in," said Del. C. Richard Cranwell (Roanoke), the House Democratic floor leader.

"This is a mass retreat from the governor's plan," said Del. Thomas M. Jackson Jr. (D-Carroll). "Democrats have taken a lot of heat for criticism of Gilmore's plan. It's comforting that we have company from our brethren across the aisle."

Gilmore aides got the first inkling Tuesday that the governor's plan could be in trouble, when top administrators held their first full briefing on the program for GOP senators. After the meeting, several Republicans began defecting over fears of the cost of the plan.

By mid-day today, a contingent of top Gilmore aides, including Chief of Staff M. Boyd Marcus Jr., Finance Secretary Ronald L. Tillett, Tax Commissioner Danny M. Payne and Counsel to the Governor David Anderson, made a last-ditch plea for unity. Then they were forced to wait outside a GOP caucus meeting as senators discussed the new plan.

Lowering the car-tax phaseout from $20,000 to $15,000 would save $20 million to $35 million from Gilmore's $493 million plan for the tax cut's first two years, said Senate Finance Committee Chairman John H. Chichester Jr. (R-Stafford). Over five years, the change could mean $170 million less in tax relief than Gilmore's plan, eventually costing 20 percent less annually.

Administration officials acknowledge that their plan would have carved 10 percent from the state's general fund when fully phased in, which they hailed as healthy discipline for a bloated government. But because the GOP plan would limit the tax cut's impact to 7.75 percent of the general fund, it would cost the state about $250 million less in its fifth year.

The Senate plan now goes to the divided House, where it will face challenges from Cranwell and other Democrats.

In other action today, Republicans killed a six-year, $800 million Democratic plan to phase out the sales tax on food, sending it to a Senate committee for a one-year study.

"The car-tax cut is for the rich and for the wealthy," said Sen. Madison E. Marye (D-Montgomery), sponsor of the food-tax measure. "This food-tax [cut] addresses everyone, the poor, the rich, the middle-income."

Many Republicans say it would be fiscally irresponsible to pass both a multibillion-dollar car-tax cut and another giant tax relief measure.

Still, the Democratic push on the food tax has resonated with the public to a degree. A Mason-Dixon Political/Media Research Inc. poll published today found that when forced to choose, 45 percent of respondents preferred Gilmore's car-tax cut, but 37 percent chose a food-tax cut.

In other action, the House and Senate gave preliminary approval to a bill authorizing the sale of $96 million in bonds to help pay for Northern Virginia transportation projects.

Staff writer R.H. Melton contributed to this report.