Virginia gov: New revenue to accompany budget cuts

AP News
Posted: Dec 01, 2009 5:49 PM

Some tax breaks are likely to be shaved along with state spending for services and programs in an austere budget to be presented to legislators later this month, Virginia Gov. Timothy M. Kaine said Tuesday.

Closing some business tax breaks and exemptions, some of them on the books for decades, was a Kaine proposal that lawmakers opposed earlier this year.

A Republican House majority and a Republican governor-elect hostile to tax increases will have to weigh Kaine's proposal for eliminating tax breaks and other revenue enhancements against projected shortfalls of about $3.6 billion in the 2010-2012 state budget Kaine submits to the General Assembly on Dec. 18.

Kaine has already directed nearly $7 billion in cuts and other budget-balancing maneuvers because of the worst economic downturn since the Great Depression. At some point, he said, the state has to look for new revenue sources, Kaine said.

"The things that get put in front of me in terms of cuts are ... tougher and tougher, and somewhere in whittling down that $3.6 billion number, I know I am going to get a cut that I don't want to make," Kaine said in an Associated Press interview.

He noted that he is considering several revenue measures, particularly ending some tax breaks deemed to serve too narrow a public purpose given sharp and enduring declines in general tax collections that support core state services such as education, health care and public safety.

Kaine declined to elaborate on any of them except the "dealer discount," a portion of sales tax receipts they were allowed to keep as compensation for collecting and remitting the tax to the state. Computerized business systems now automatically assess and route tax collections to the state, Kaine said, eliminating the need to reimburse retailers and boosting revenues by $70 million a year.

"Most citizens are stunned to find out that a portion of the sales tax they pay for services doesn't go to services, but that $70 million a year stays with the merchants, and that was an archaic thing we used to do when it was cash registers and paper trying to collect money and remit it to the state at the end of the month," Kaine said.

Virginia Retail Merchants Association President Laurie Aldrich said the process is not automated and remains costly for store owners. Her organization lobbied against the proposal last winter and will do so again,

"It really is burdensome," Aldrich said.

She also said the discount doesn't account for sales taxes that stores must cover on bad debts _ goods purchased with worthless checks or bad credit cards.

House Republican Leader H. Morgan Griffith of Salem said his party didn't like the idea a year ago, and a GOP majority bolstered in last month's elections will be less amenable this year.

"Sure, let's have a few more car dealerships go out of business. That's real good thinking," Griffith said sarcastically.

The budget is the major policy proposal Kaine will make before ending the single, nonrenewable term Virginia uniquely allows its governors on Jan. 16. His successor, Republican Bob McDonnell, has repeatedly and unequivocally rejected any increase in taxes.