Tuesday, December 08, 2009
Editorial: A tempting budget target
Kaine hasn't squelched speculation about trimming car tax relief costs. We fear it simply wouldn't survive.
From the RoundTable blog
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Virginia's car tax rebate is a poorly conceived, inefficient, enormously expensive form of local tax relief that the state never should have taken on and no longer can afford. Yet getting rid of it is a political nonstarter.
That has been the conventional wisdom since Republican Jim Gilmore rode a "No Car Tax" bumper sticker into office in his 1997 gubernatorial campaign. The next year, he signed into law a convoluted taxpayer reimbusement program that was to start Virginians down a path toward a total phase-out. The effort stalled when the promised bite out of state revenues grew voraciously; lawmakers capped the damage to the state treasury at $950 million a year.
Now, as Democratic Gov. Tim Kaine prepares his final budget, he is looking at closing a recession-driven revenue gap of $2.7 billion to $3.5 billion -- over and above the billions of dollars he already has chopped in state spending. Eliminating the car tax relief for motorists would go $1.9 billion toward balancing the two-year plan.
The talk is that Kaine is considering slaughtering that sacred cow. He did, after all, say "everything is on the table" in order to balance a budget at a time when tax revenues remain stubbornly below expectations. As he noted last week, "The car tax is significant," though he added it was "not the only thing we're looking at."
It is a tempting target.
Still, we hope the departing governor will not leave the state with a budget dependent on eliminating this huge obligation -- only to have it restored immediately by lawmakers and a newly installed Gov. Bob McDonnell at the cost of cuts of their choosing.
If, contrary to conventional wisdom, a cut in car tax relief should survive, it would threaten localities already bracing against warnings about dwindling state aid. They could cut their rates to reflect the loss of the state subsidy or deal with angry taxpayers facing a heftier bill for this hated tax.
At some point, local governments know, spending cuts become as painful as tax increases to people in their communities.
