-- Virginia's tax collections continue to surpass expectations, the state government announced Thursday, and that added fuel to a political debate over whether last year's tax increases were needed.
State Secretary of Finance John M. Bennett told the Senate Finance Committee that tax collections have increased by 15.2 percent over the first 11 months of the last fiscal year. That's well ahead of the official forecast of 10.3 percent growth for fiscal 2005, which ends in two weeks. Revenue grew at an even higher rate in May, increasing 23 percent over last year.
Bennett said that such growth was "unsustainable," because it came largely from historically unpredictable sources: investors, real estate transactions and corporate income.
"These are the three most volatile sources of income," he told the panel during a morning meeting at the state capital, adding that even without the tax increases, revenue would have been up 19.2 percent in May. Much of the growth did not come from increases in sales and tobacco taxes that were part of last year's tax plan.
But the campaign of Republican gubernatorial candidate Jerry W. Kilgore renewed its criticism of the increases, saying the improvements in services that they were designed to pay for could have been financed by the state's economic growth.
The plan for taxes and services approved by the legislature is a central part of the legacy of Gov. Mark R. Warner (D). The plan has been embraced by the Democrat who wants to succeed him, Lt. Gov. Timothy M. Kaine.
The 2004 tax plan, which was intended to raise $1.5 billion for the state's two-year budget, will probably be a prominent issue in the state's general election campaigns. On Nov. 8, Virginians will elect a new governor, lieutenant governor and attorney general. All 100 seats in the House of Delegates also will be on ballots.
"Jerry Kilgore was out front saying the economic growth that Virginia was experiencing would lead to greater revenue. The numbers we see certainly bear that out," said Kilgore spokesman J. Tucker Martin. "Jerry Kilgore fully believes that the way you grow an economy is by letting people keep more of their hard-earned money. You don't grow an economy by taking money from people's wallets and putting it into state coffers."
Kaine's campaign staff and Republicans who supported the tax package said the additional revenue was needed to meet state commitments in education, health care and other services over the long term. They continued to say Thursday that the tax increases were enacted for future benefit and that any step back would risk putting Virginia in a shaky fiscal posture if the state and national economies start to slow.
"If Jerry Kilgore has his way, we'd still be operating under deficit spending, we'd never have gotten our fiscal house back in order and we'd be struggling to fully fund" education, said Kaine's director of communications, Mo Elleithee. "I'm not sure I want to take a lecture from Jerry Kilgore on fiscal responsibility."
Bennett told the committee: "I know there's going to be a lot of second-guessing. That just goes with the territory."
Timothy M. KaineRepublican
Jerry W. Kilgore