Local Meeting Spotlights Budget, Tax Reform

Local Meeting Spotlights Budget, Tax Reform

Legislators: General Assembly at a Crossroads

The budget and tax reform will dominate the session in Richmond this year, Del. Tom Rust (R-86) told the roughly 20 gathered in the Herndon Council Chambers Saturday to hear a legislative update from Rust and Sen. Janet Howell (D-32).

While a majority of time may be devoted to picking apart Gov. Mark Warner’s fiscal year 2004-06 budget, there will be plenty of other things to keep the elected officials busy.

"The legislative folks have told us there were about 4,500 pieces of legislation asked to be drafted," Rust said. "It is a whirlwind of paper. One out of two may ultimately get approved."

At the meeting, questions from the audience ranged from the proposed increase of the cigarette tax and its impact, the possibility of reducing the number of out-of-state students admitted to local colleges, the chances of equal taxation authority being granted to counties, and the various funding formulas.

"There is no question, this is going to be the most serious session since I've been in the General Assembly," said Howell, who was first elected in 1992. "The state really is at a crossroads and the state has to decide what kind of state it wants to be."

RUST SAID the governor's $59 billion two-year budget breaks down to $27 billion for the general fund and $32 billion in non-general fund, which the General Assembly essentially has no control over. He said in the House of Delegates, the Appropriations Committee breaks down the budget by removing all money generated by new taxes to get a base figure. The premise behind removing those funds, he said, is that the Finance Committee raises the money and the Appropriations Committee spends it. Therefore, the budget cannot include expenditures that have not been approved by yet. In the Senate, Howell said such a conflict does not exist since the Finance Committee performs both functions of the House's separate committees.

"The good news is Virginia’s economy is turning around and picking up," Rust said.

The major funding sources in the governor's budget, said Rust, are the sales and income taxes, which make up 85 percent of the total revenues. He said the budget includes approximately $1.8 billion in new money, but also approximately $3 billion worth of new expenditures.

"The governor, in his budget, has fulfilled commitments made over the last four years. The governor has also said about 65 percent of Virginians will pay less," Rust said. "Problem is, 35 percent will pay more and I suspect those people will be in Northern Virginia."

Howell said Sen. John Chichester (R-28), the president pro tempore, has proposed his own budget, which includes "aggressive" tax relief by eliminating the car tax within two years, removes the food and estate taxes at a quicker rate; increases the sales and gas taxes and places a sales tax on gas; and raises the cigarette tax from 2.5 cents per pack to 35 cents per pack.

"The Senate will put out a budget that accelerates tax relief and increases the cigarette tax. It will not be the governor's budget or Chichester's budget," Howell said. "I think we are going to have some sort of compromise."

NEITHER POLITICIAN said that the Philip Morris Company's threat to move its headquarters out of Virginia if the cigarette tax is increase should be taken seriously, Should the company leave for North Carolina as promised, it could take 9,000 jobs with it.

"They say that publicly ... but I think Phillip Morris recognizes it has some civic duty, so to speak," Rust said. "I think we will see an increase, probably closer to the governor's proposal."

Both Rust and Howell also said they would not support a cap of real estate taxes because that would limit local governments. He further said he did not expect such legislation to pass anyway. Additionally, neither sees bills that limit a town's taxing authority on such items as the Business, Professional and Occupational Licenses (BPOL) and cigarette tax getting out of committee in wither the House or Senate.

"What are the chances of the equal taxing authority passing?" asked Herndon Councilman Harlon Reece.

"I don't think all of it will happen. Some, like with tobacco, might," Howell said. "The transient tax got too complicated and I'm less hopeful about the meals tax."

As for tax restructuring, Rust said fellow Del. Allen L. Louderback, a Republican from Page County, "scrapped the existing tax structure and started over," including the long-talked about but never implemented tax on services.

"I don't think it will go anywhere. ... He put forward a very well thought out tax restructuring plan," Rust said.