The Northern Virginia Daily's Political Depot

A service for our readers outside the Northern Shenandoah Valley... a sampling of The Daily's political coverage, plus unofficial, 'reporter's notebook' stuff. And occasional dry humor...

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Location: Strasburg, Virginia

Wednesday, February 22, 2006

House plan contains $50 million for car tax; A1

By Garren Shipley
Daily Staff Writer

Yes, Virginia, there is still a car tax. But it might not get its fangs back this year after all.

It hasn’t garnered much publicity, but deep in the House of Delegates transportation plan is $50 million designed to keep the state from running out of money before it picks up its share of local car tax bills.

“I think [the extra car tax relief] was a late bloomer” in the House’s transportation deliberations, joked Del. Joe May, R-Leesburg, chairman of the House Appropriations Transportation Subcommittee.

Born during former Republican Gov. Jim Gilmore’s run for office in 1997, the car tax “rollback” required the state to start writing checks to reimburse local government for a share of property tax revenue on personal cars and trucks that they had lost.

If the tax collections had stayed strong, the state would have covered the entire tax starting in 2002. Tax collections softened during the “dot-com” bust and post-9/11 economic slump, and legislators froze the reimbursement at 70 percent.

In 2004, faced with what looked like a financial crisis and danger to the state’s pristine bond rating, legislators gutted the phaseout and replaced it with an annual line item in the state’s general fund budget — $950 million, starting in fiscal 2006.

That started a long string of complicated procedural changes for local governments around the state as they worked with Richmond to figure out just how much the state would cover and how much drivers would pay.

Legislators have been hearing about it, too.

“Distribution is turning into a nightmare as we bump up against the cap,” May said. “We’re acutely aware of that.”

Treasurers and commissioners of revenue from across the state have expressed their displeasure at the massive complication that the new system has created.

The “ugly fact of life is that the [commissioners of revenue and others officials] really had their hands full in trying to get their monies distributed,” he said.

Despite calls to roll back the tax completely, the House decided it was better to raise the cap to $1 billion than try to end the levy entirely.

“We’re pegging it at 70 percent because that’s where we’ve been for the past couple of years,” May said.

Setting aside $50 million out of a $74 billion proposed budget may not look like much, but it would have a significant impact on taxpayers’ bottom lines and complications at the county courthouse.

State officials still have some time to work out the final details and tell local governments what percentage the state will pick up. Early estimates in Shenandoah County suggested that the state’s share would be 62 percent this year.

At the current rate of $2.86 per $100 of assessed valued, that would have a significant impact on tax bills.

If the state picks up the 70 percent it has up until now, the tax paid in Shenandoah County on a $20,000 car would be $171.60. If that percentage drops to 62 percent, the bill goes up 27 percent to $217.36.

Transportation plans put forward by Democratic Gov. Tim Kaine and the GOP-controlled Senate don’t contain similar provisions.

Kaine spokesman Kevin Hall said the governor would take a dim view of the House plan. While he supported former Gov. Mark R. Warner’s plan to kill the tax once and for all over the long term, it’s not a battle he’s looking to join.

“The governor would be reluctant to revisit the issue unless it can be shown that busting the cap can be done in a fiscally responsible way,” he said.

Calls to members of the Senate Finance Committee weren’t immediately returned Wednesday.

Even with probable opposition, May said he’s mildly optimistic that the cap can be boosted.

“I’d say there’s a reasonable chance” the measure will wind up in a plan signed by Kaine.