Kaine's tax plan faces roadblocks in General Assembly

RICHMOND — Minutes after Gov. Timothy M. Kaine unveiled a plan on May 12 for an almost $860 million tax increase to help transportation, House Republican leaders declared it all but dead.

"I don't see anything positive in the plan that could make it something that could be considered," said House Majority Leader Morgan Griffith (R-Salem). "It's all tax, tax, tax."

So begins the latest chapter in the state's six-year quest for money to build new roads and improve existing ones.

Many of the projects on hold are improvements to deteriorating or unpaved roads in Carroll and Grayson counties.

Kaine, a Democrat, said the reputation of the legislature to solve problems rests in its willingness to increase taxes to improve roads, rail and mass transit. "The General Assembly must act because its reputation, and our reputation, are at stake," Kaine said during a news conference.

The governor has called a special session of the General Assembly for June 23 to take on transportation funding.

Kaine said new money is needed to enhance the quality of life, ensure the safety of bridges, and improve emergency services and hurricane evacuation in Hampton Roads.

Kaine offered his tax plan after weeks of consulting with senior Democrats and Republicans in the House and Senate. He said his proposal represents a compromise that incorporates a bevy of taxes that lawmakers have closely considered and many of them have approved since 2002.

The plan is a blend of new statewide levies and a special penny-on-the-dollar sales tax increase only in Hampton Roads and Northern Virginia. The current 5 percent sales tax would be increased in those regions to 6 percent, except for food and over-the-counter medicines. The increase would generate a total of $474 million next year.

Statewide, Kaine proposed that the 3 percent sales tax on new and used cars be increased to 4 percent. It would generate $172.5 million in new revenue next year.

Annual vehicle registration fees would increase by $10. For most cars, the new cost would be $49.50, producing $70.3 million next year. The increase, if approved, would mark the second time in two years that registration has been boosted by $10.

Those revenue sources would help pay for the upkeep of existing state roads.

Kaine also would increase the grantor's tax on parties that sell homes by 25 cents per $100 of the sale price, producing $142 million. The levy is now 10 cents per $100. The increase would cause the seller of a $250,000 home to pay an additional $625 in taxes.

That money would be used for mass transit, road needs related to economic development projects and at the port of Hampton Roads and airports across the state.

Kaine said the bill he presents to the General Assembly would include "lock box" provisions to guarantee that the new taxes are dedicated to transportation. He said "the revenue source expires" if the money is not used for roads, rail or public transportation.

The safeguard is important because polls have indicated that voters do not trust state officials to use transportation taxes for their intended purposes.

House Republican leaders in recent years have opposed increasing taxes for transportation.

The General Assembly approved a compromise last year that allowed transportation authorities in Hampton Roads and Northern Virginia to raise local taxes for road projects. The Virginia Supreme Court struck down the plan in February, however, ruling it unconstitutional for unelected authorities to impose taxes.

The decision left lawmakers searching for a new transportation plan.

Kaine characterized his plan as "my best effort," but invited lawmakers to improve it.

Senate Majority Leader Richard Saslaw (D-Fairfax) said he would continue his effort to modestly increase Virginia's gasoline tax, which he sees as the most reliable revenue to maintain roads.

Saslaw said if Republicans block a funding solution for roads, "they're going to pay dearly at the next election."

Many House leaders want nothing to do with new taxes, however. Passage of Kaine's plan depends on the defection of some Republican delegates who would have to defy party leaders and vote for the plan.

Some opponents of Kaine’s plan sa]y the tax increases are inappropriate while the economy is weak.

TAX PLAN GETS TEPID BACKING FROM DEMOCRATS

RICHMOND — While Gov. Kaine has to fight Republican opposition to his plan to increase taxes and fees to pay for transportation projects, he also must sway Democratic legislators who have different ideas.

Many Democrats agree that Virginia has to raise about $1 billion a year for transportation needs, but there is a split between party members in the House and Senate over how to raise the money.

Within four years, Kaine’s plan would generate more than $1 billion annually.

Lawmakers will return to Richmond on June 23 to address transportation funding in a special session called by Kaine.

Democrats lauded Kaine for introducing the initiative and challenged GOP legislators to offer an alternative, though few have been effusive in their praise.

"The governor deserves a lot of credit for getting the ball rolling," Senate Majority Leader Richard Saslaw (D-Fairfax) said. "What will occur over the next five to six weeks is we'll... discuss his idea and ours.”

In that time, Kaine must find lawmakers to carry his transportation bill and build support.

Saslaw favors a gas tax increase to pay for maintenance costs that continue to eat into money set aside to build new roads; Virginia last raised that levy in 1986.

Citing record prices of fuel at the pump, Kaine eschews a gas tax and instead relies on increases to the auto sales tax and vehicle registration fee to pay for road repairs.

Bypassing the gas tax is a welcome development to House Minority Leader Ward Armstrong (D-Henry County).

"I think the plan is basically sound," he said. "While clearly, one of the differences between the House Democrats and Senate Democrats has been the gas tax, I think there's much in common between us... The real problem is whether or not we'll get a chance to vote on this."

Democrats said getting any plan out of the Republican-controlled House could be difficult. Some legislators predict the bill will be buried in a GOP-controlled House committee. If it is, Republican legislators would avoid having to go against their own party leaders by voting for new taxes aimed at tackling the traffic congestion problems in the more populous areas of the state, like Northern Virginia and Hampton Roads.

House Majority Leader Morgan Griffith (R-Salem) said GOP legislators will not defect and vote for a slate of new taxes, particularly during an economic recession.

"I don't know how we're going to get anything done. It looks to me like the governor is setting us up for a train wreck," Griffith said.

Del. Kenny Alexander (D-Norfolk) disagrees. "I hope my other colleagues will realize that it may be politically unpopular, but we have to do something."