Home Focus | No car tax, but yes, local income tax?

Focus | No car tax, but yes, local income tax?


Kaine gets heat for controversial proposed switch

Story by Chris Graham
[email protected]

Goodbye, No Car Tax. Hello, New Local Income Tax.

Tim Kaine didn’t exactly say it that way, but that was the sum effect.

“Let’s keep the promise. Let’s get rid of the car tax on personal vehicles completely, but do it the right way,” Kaine said in his budget message to state lawmakers today in Richmond that accompanied his proposed 2010-2012 state budget.

The “right way,” in the form of a proposed 1 percent income-tax surcharge that would go to local governments in exchange for their agreement to eliminate the car tax, has raised quite the ruckus, and on both sides of the political aisle, too.

“Hell no. Not for this Democrat,” Northern Virginia Democratic State Sen. Chap Petersen wrote on his blog after the presentation from Kaine.

“As Virginia taxpayers, families and businesses are struggling with the difficult decisions brought about by the national economic recession, it is terrible that Gov. Kaine would propose increasing their financial burden even more through higher taxes,” House Speaker Bill Howell, R-Stafford, said in a statement.

“It’s a slight of hand. You can disguise it in all kinds of ways, but it’s still a tax increase from people. It takes away money from their household budget,” said former Gov. Jim Gilmore, the author of the car-tax relief plan that he rode to victory in the 1997 Virginia gubernatorial campaign.

Kaine’s point, lost in the bipartisan rhetoric, is that the car-tax relief has become an unwieldy state-budget burden, to the tune of $950 million a year that basically goes from one taxpayer pot of money to another.

“The phrase ‘No Car Tax’ fit on a bumper sticker, but it was poor state policy to use state tax dollars to pay down a local tax when local voters had the complete ability to influence local elected officials to reduce the tax if they saw fit. Taking $950 million in state funds off the top every year to subsidize local tax collections has hampered the state’s ability to invest in key priorities and weakened our ability to maintain structural balance in our budget,” Kaine told legislators, before offering a sort of lecture point on their own lack of commitment to the program.

“While some of you might disagree with this proposal in your public statements, your actions have told the public that you do not place a high priority on the car tax payment either,” said Kaine, pointing out that by 2004 the General Assembly ended the long-term phase-in of the supposed elimination of the tax “at a decidedly reduced program whereby the state pays a smaller and smaller percentage of personal car tax bills on the first $20,000 of the value of each automobile.”

“In the nearly six years since that accord was reached, not a single legislator of either party has ever come to me to say that we need to move forward and completely get rid of the car tax. Your unanimous decision to abandon the concept of full car-tax relief speaks volumes,” Kaine said.

Petersen on his blog countered that “(u)nlike other tax credits which favor certain individuals or industries, the ‘car tax relief’ directly benefits middle-class families who own property and pay taxes. There is no lobbyist to clamor for it. It exists because it benefits voters,” Petersen wrote, calling Kaine’s move to propose an end to the program “a bad choice, but not entirely unexpected.”

Petersen blasted the proposed income-tax hike, promising that he “will not support an income tax increase on working families. Period.”

“What is most disappointing is that this administration in 2006 went along with repealing the estate tax (called the “death tax” by Republicans and Democrats pretending to be Republicans) which means that inherited wealth in Virginia is tax free,” Petersen wrote.

“After this legal change (which was preceded by some noteworthy six-figure campaign donations), you can inherit sums above $100 million and not pay a dime in taxes. Yet the governor won’t now touch this tax break. Nor will the Assembly. Meanwhile, working people are supposed to pay more?”

Republican Gov.-elect Bob McDonnell rather diplomatically handled the tax-increase matter.

“It is bad economic policy to increase taxes on Virginians, especially as they continue to struggle with the worst economy in generations,” McDonnell said in a statement. “Families and businesses are making strategic reforms and deep cuts, and government must do the same. We must be looking for every means by which we can attract businesses and entrepreneurs to the Commonwealth. Capital is mobile, and I do not support any measures that could dissuade investment in Virginia, or put the state at a competitive disadvantage with our neighbors.”

There was more rancor on another Kaine proposal related to state employees, who would go without pay raises in fiscal-year 2011 and fiscal-year 2012 if the Kaine budget were to be adopted. State employees have not received any pay raises since Dec. 1, 2007. The proposed Kaine budget also trims 664 state-government jobs and eliminates another 1,879 jobs on top of the 1,651 layoffs that the Kaine administration has overseen since 2007.

Virginia Governmental Employees Association executive director Ronald Jordan called the Kaine proposals a “gut shot” to state employees “where death is long, lingering and excrutiatingly painful.”

“State employees are demoralized, worried for their families, and afraid for their future. Proposals that will cut the jobs and take home pay of hardworking state-employee families make it clear this budget is being balanced on the backs of its workers,” Jordan said in a statement.

Kaine also set forth line items cutting state spending on K-12 and higher education and state contributions to localities for local law enforcement.




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