Kaine Proposes Tax Hike, Deep Cuts in Budget

Outgoing Gov. Tim Kaine (D) wants state lawmakers to eliminate Virginia’s car tax cut and replace it with a one percent increase in income tax rates.

The proposal is part of Kaine’s final budget recommendation to the General Assembly — designed to close a $4.2 billion budget gap for the 2010-2012 biennium.

“The phrase ‘No Car Tax’ fit on a bumper sticker,” Kaine said. “But it was poor state policy.”

The governor said the plan would save Virginia at least $950 million annually and would help balance a budget that’s fallen deeply into the red.

“The line item has stayed in the budget without any legislative champion for only one reason — political expedience,” Kaine said. “Well, in a time when tough choices have to be made…political expedience is not a sufficient rationale for continuing this $950 million folly.”

Kaine’s proposal — and his chiding of lawmakers for inconsistently supporting the car tax cut — had Republicans steaming.

“It’s a good thing that we have been here in the legislature to stop some of the governor’s proposals,” said House Majority Leader Morgan Griffith (R-Salem).

“We’re not going to take the governor’s advice this  time and raise over a billion dollars a year on the taxpayers of Virginia at a time when every family is hurting,” he said.

House Speaker Bill Howell (R-Stafford) said Virginians clearly rejected new taxes by electing Bob McDonnell (R) to succeed Kaine as governor. McDonnell ran on a pledge that he would not raise taxes.

In a written statement, McDonnell called Kaine’s proposal “bad economic policy.”

Some lawmakers were visibly angry as Kaine laid out his budget proposals for the last time before he leaves office Jan. 16.

Republicans promised to quickly reject the tax increase.

Kaine’s budget also makes deep cuts to programs that have already taken a beating in recent years. The governor has cut the current spending plan by more than $7 billion. 

Among the cuts are:

*Funding reductions to K-12 and higher education

*A nearly 20 percent cut in money flowing to public safety — which did not take any cuts during the most recent budget process.

*A $419 million reduction to state Medicaid programs.

*Layoffs of 664 state employees and the elimination of an additional 1,879 vacant positions.

*No pay increases for state employees in fiscal years 2011 and 2012.

*A reduction in the state contribution to employees’ retirement accounts.

*Changes to the funding structure for local governments that will require localities to fund the offices of area commisioners of revenue and treasurers.

*An elimination of the so-called “dealer discount” tax break that merchants receive for remitting sales taxes to the Commonwealth.

More information on the governor’s budget proposal can be found here.

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