Va. House Panel Blocks Gov. Kaine’s Insurance Tax Plan

February 7, 2006

The heart of Virginia Gov. Timothy M. Kaine’s transportation funding plan — higher car sales and insurance premiums taxes — died Monday in the House Finance Committee.

On party-line votes, the tax-writing panel’s Republican majority killed both of the Democratic governor’s bills. With no House transportation financing plan, only the Senate’s $2 billion two-year transportation tax package survives.

Later, on the House floor, Republicans advanced toward final floor votes Tuesday two bills that would, for the first time, take substantial oversight of transportation away from the executive branch and vest it in the part-time General Assembly.

With those actions, the debate between the House and Kaine escalates as the legislative session approaches its critical midpoint and a Feb. 19 deadline for completing work on budget bills.

Kaine has said he’s willing to negotiate for other sources of sustainable revenue, but has already begun traveling the state to build public support for dedicating up to $1 billion annually to roads, rails and transit projects and giving localities a greater hand in controlling runaway suburban sprawl.

He was expected to pick up the pace when he addressed a Capitol Square rally of smart-growth advocates who support his local land-use bills.

“I think you will see Governor Kaine increasingly making the point that there is a cost to doing nothing,” said Kevin Hall, Kaine’s press secretary.

Finance Committee Republicans said Kaine’s tax increases at a time when the General Fund surplus approaches $1 billion is unacceptable.

“What does a surplus mean? It means you’ve sent too much money to Richmond,” said Del. Scott Lingamfelter, R-Prince William.

But Kaine and committee Democrats say today’s surplus and the good economy that creates it won’t be there every year, and a transportation plan can’t be financed without a reliable and dedicated revenue source.

The administration, however, opposes diverting to transportation money from the general fund, which pays for public education, health care and public safety.

One of Kaine’s bills would have increased the sales tax on automobile sales from the present discounted rate of 3 percent to the same 5 percent rate that applies to all other retail sales. It died on a 14-8 committee vote.

The other would have increased the rate of taxes paid on automobile insurance premiums. The committee killed it on a 13-8 vote.

Lobbyists for the Virginia Automobile Dealers Association and Virginia insurers called both proposals unfair and damaging to their industries.

VADA lobbyist Donald L. Hall said ending the sales tax discount for car sales would cost consumers statewide about $800 million the next two years and burden auto dealers already reeling from last year’s sharp gasoline price increases.

“You increase the price of cars, I can assure you one thing: We will not continue selling those cars at the pace we’ve been selling them,” he said.

J. Christopher LaGow, who represents several major national insurers, said the premiums tax is unfair because only owners of cars registered in Virginia pay it.

“None of the nonresidents who use our roads day in and day out by the millions are affected by this,” LaGow said.

According to the Department of Motor Vehicles, car sales in Virginia jumped from 1.59 million vehicles in 2003 to nearly 1.73 million in 2004 before falling to 1.71 million last year after gasoline prices doubled, cutting sales of large, fuel-hungry sport utility vehicles.

The average sale price for all new and used cars last year was of $11,557, according to DMV figures. An additional 2 percentage points in taxes would increase the price by $231.14.

A competing plan proposed by Senate Republicans also would boost the automobile sales tax to 5 percent as well as increase the tax on fuel.

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