By Michael Sluss

Archives Reprint

    RICHMOND - Virginia's Democratic lieutenant governor and Republican attorney general had opposite reactions last month after the General Assembly passed a sweeping package of tax code changes and put a lid on the politically popular car tax relief program.

    Minutes after the Senate and House of Delegates adjourned April 27, Lt. Gov. Tim Kaine released a statement praising lawmakers "for agreeing to a tax reform plan that moves Virginia forward."

    Attorney General Jerry Kilgore called it "a sad day for the hard-working men and women of Virginia and their families."

    The tax debate didn't end with the passage of a bill that will generate $1.36 billion in revenue over the next two years. Kaine and Kilgore are almost certain to argue the issue next year, when they are likely to square off in a race for governor.

    "I think taxes will certainly be ... part of every campaign next year," Kilgore said Thursday.

    Kilgore was an early and outspoken opponent of Democratic Gov. Mark Warner's plan to revamp the tax code and increase levies on sales, cigarettes and six-figure incomes. He criticized the governor for proposing tax increases in the early stages of an economic recovery and for waiting until after the 2003 legislative elections to make the plan public.

    Kilgore also opposed legislation passed by the Republican-run Senate that would have produced nearly $4 billion in new revenue over two years by increasing various taxes. He joined former governors George Allen, a Republican, and Douglas Wilder, a Democrat, in calling for a referendum on proposed tax increases - an idea that Warner and Senate leaders quickly dismissed.

    Kilgore opposed the tax increases, even after 17 House Republicans voted for a compromise bill that will increase sales and cigarette taxes and reduce certain levies, including the sales tax on groceries. Warner plans to sign the bill.

    "The Republican Party I grew up in favors limited government, favors lower taxation," Kilgore said. "I'm not ashamed of that. I'm proud of that. I stood on the principles that I've grown up in the Republican Party adhering to, and I will continue to adhere to those principles."

    Kilgore said the outcome of the General Assembly's tax and budget debate will not dilute his message on the campaign trail next year.

    "I feel pretty confident I know what the voters think about raising taxes," Kilgore said.

    Kaine embraced the compromise tax package and helped keep Senate Democrats on board after Senate leaders shelved some key portions of their proposal to get a deal with the House.

    Kaine said he would welcome a debate over taxes, declaring himself "happy to be judged by my role" in this year's legislative fight.

    "This was the year when leaders led and followers ducked," Kaine said.

    Kaine said he will make the case for his leadership to the coalition of education and health care advocates and Republican-leaning business leaders who rallied behind Warner and the Senate in the tax debate. The legislation will support the investments in essential programs that those groups advocated, Kaine said.

    "This was a bipartisan deal in both houses that was supported by virtually the entire business community in Virginia, the education community, the public safety community, the local government community," Kaine said. "I hope the people who are really caring about this will remember who was on their side, who was in the foxhole with them, and who was throwing a grenade into the foxhole."

    University of Virginia political analyst Larry Sabato said Kaine's stance in the tax debate could help generate contributions from the same business interests that backed Warner in 2001.

    "I think a lot of them were waiting for Kaine to become a credible candidate," Sabato said.

    Sabato said the Republicans' intraparty squabble over taxes, which contributed to a two-month delay in passing a budget, could also erode some of Kilgore's support.

    Asked whether he expects a backlash from those who supported the tax and budget plans passed by the legislature, Kilgore said: "I expect there to be huge support from hard-working, tax-paying Virginians."

    "People I talk with every day question what we're doing in Richmond, wonder why we need new taxes and expect to see results out of their state government," Kilgore said.

    Kilgore criticized lawmakers for capping the state's car tax reimbursements beginning in 2006, stalling a politically popular program that Republicans have championed in the past.

    Former GOP Gov. Jim Gilmore rode to victory in 1997 on a promise to phase out the personal property tax on the first $20,000 of a vehicle's value. The reimbursement rate has remained frozen at 70 percent since 2001 because of weak revenue growth, but the program's cost has increased as Virginians have bought new and more valuable cars.

    Warner proposed completing the phaseout by 2008. But lawmakers opted to cap the reimbursements at $950 million, which means vehicle owners will gradually pay a larger percentage of their car tax.

    "I think we'll hear a lot about that in coming years as people get their higher car tax bills," Kilgore said.

    Kilgore said he would consider pushing for the removal of the lid on car tax reimbursements as part of a "larger policy discussion" on taxes that could also entail such proposals as new incentives for businesses.

    Kaine said Kilgore could have a hard time running against the car tax cap because Republican legislators proposed it.

    "If he wants to fight with the guys in his own party about that, I'll let them have an internecine squabble over that," Kaine said.

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