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Location: Strasburg, Virginia

Wednesday, January 18, 2006

GOP state delegates talk tax relief at Capitol; A1

By Garren Shipley
(Daily Staff Writer)

Yes, Virginia, there’s still a car tax.

But there’s also a second wind brewing in the House of Delegates to kill it.

House Speaker William Howell, R-Stafford, held a policy briefing for reporters at the temporary Capitol in Richmond on Tuesday on the agenda for the House Republican Caucus, and tax relief was high on the list.

The GOP caucus in the House wants to do something to return a portion of the state’s projected $1.5 billion-plus projected surplus to taxpayers, Howell said.

“It is the right time to pay a responsible dividend to the people who shouldered a greater burden during hard economic times earlier this decade,” he said. “It seems to me — and many in the General Assembly — that some of this money ought to be returned so it can be saved or spent by those who earned it.”

Giving the money back should take the form of a sales-tax holiday for back-to-school shopping, a repeal of the estate tax, or “death tax,” and completing the rollback of the car tax, added Del. Clay Athey, R-Front Royal, the chairman of the caucus policy committee.

“That was a commitment made by our predecessors in office, and suffice it to say that at least the House Republican Caucus have not given up on that commitment to one day phase out the car tax,” he said.

The car tax has proven to be a particularly resilient foe for legislative tax-cutters, resisting numerous efforts to zero out levies on personal cars worth $20,000 or less.

Rolling back the tax was first proposed by Republican Gov. Jim Gilmore during his campaign in 1997 to succeed George Allen.

Enacted into law in 1998, the Personal Property Tax Relief Act was designed to have the state take over payment of personal property tax payments to local governments on the first $20,000 of a car or truck’s value over time.

At the bottom line, local governments got the money they needed, while residents had one less tax to pay.

But when the economy faltered in 2000 and 2001, the General Assembly froze the phaseout of local tax at 70 percent.

Faced with what looked like a financial crisis in 2004, legislators did away with the phaseout altogether, instead setting aside $950 million annually to pay car tax bills.

For car owners, that will likely translate into higher bills this year, as more and more cars of higher value line up for their share of the capped state aid.

Final numbers aren’t ready yet, but finance officials in Shenandoah County have said they expect state funding to pay for somewhere around 62 percent of bills in 2006.

In Winchester, bills for many residents will more than double, as the City Council hiked the tax to help pay for some $55 million in renovations at John Handley High School.

A number of bills have already been introduced that would complete the rollback of the car tax, but GOP officials haven’t yet said which one, if any, would get their support.

“I wouldn’t want to commit to one particular bill,” Athey said, adding that it could be done in the form of a renewed, slower phaseout or an increase in the $950 million cap via the state budget bill.

Whatever mechanism is used, the House will have to get a reluctant Senate and governor on board.

Senate Republicans have been at loggerheads with their House counterparts over fiscal matters for some time. The 2004 legislative session concluded when the Senate and a minority of Republicans in the House voted with Democrats to raise taxes by $1.5 billion.

Democratic Gov. Tim Kaine hadn’t said anything about the GOP plan as of late Tuesday, but told legislators during his State of the Commonwealth address Monday night that the 2004 budget deal had to be preserved.

“It would be a grave mistake now to violate that bipartisan budget reform agreement — an agreement that has earned the overwhelming support of our constituents,” he said. “We must honor it.”

The GOP caucus is well aware of the friction car tax relief has caused in the past, Athey said, and will work to find something that doesn’t raise too many eyebrows.

“Part of this is going to be proposing something that they’ll find more palatable,” he said.