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RICHMOND —
Virginia’s sales tax increases by a half-cent on the dollar today, and the
levy on cigarettes goes up to 20 cents a pack.
The cost of buying a home will be marginally more expensive because the
fee for recording deeds is being raised. And monthly bills for
electricity, gas and telephones eventually could rise because of the
repeal of a tax break for utility companies.
Those changes form the bulk of a record $1.7
billion in tax increases for the next two years that the General Assembly
approved this spring to raise money for education, health care and public
safety.
Divided lawmakers sought to soften the blow by authorizing about $300
million in tax cuts. Virginians will see many of those benefits next year
when they file state income taxes.
Virginia’s 4.5 percent sales tax will increase to 5 percent, generating
$724 million in new revenue in the next two budget years. Even with the
increase, Virginia’s sales-tax rate will remain below all of its
neighboring states except Maryland, which also charges 5
percent
A family of four with a household income of $60,000 will pay about
$1.85 a week in extra sales taxes, according to Secretary of Finance John
M. Bennett. A family of four bringing in $150,000 a year would pay $3.65 a
week more. The higher cigarette taxes will generate $274 million in the
next two years. Virginia’s old tax of 2.5 cents per pack was the lowest in
the nation. The levy goes up to 20 cents a pack today and 30 cents a pack
July 1.
Virginia will raise $215 million by increasing the tax on recording
real-estate deeds to 25 cents, from 15 cents, per $100 of value. A person
buying a $200,000 home would pay a $500 recording fee, up from $300 .
The General Assembly also voted to generate $149 million by ending a
sales-tax exemption on property purchases that had been granted to
electric utilities, telephone providers and natural gas companies.
Virginia Dominion Power will spend a year studying the impact of the
tax and then pass the added expense on to consumers, according to David
Botkins, a spokesman for the company.
Other corporations, including Verizon and Verizon Wireless, say they
will announce soon whether they will seek to recoup their losses. Intense
debate over the tax increases earlier this year extended the General
Assembly’s scheduled two-month legislative session to a record 113 days.
The controversy is by no means over. The increases are expected to be the
key issue in next year’s gubernatorial races and for many seats in the
House of Delegates.
Attorney General Jerry W. Kilgore, the presumptive GOP gubernatorial
nominee, said that the tax increases were a mistake and that he may seek
to repeal many of them. Kilgore said they were a panicked reaction to a
temporarily stalled economy, which he said is now on the mend. Kilgore
noted that Virginia closed out the 2003-04 budget year June 30 with a $330
million surplus.
“The taxpayers are looking at Richmond and feeling they’ve been
hoodooed,” Kilgore said. “Virginia’s economy is growing and growing, and
I’m worried that these new tax increases will slow some of that growth,”
he added.
Lt. Gov. Timothy M. Kaine, the presumptive Democratic gubernatorial
nominee, strongly backs the tax increases.
“What we did will allow investment in our schools, ” he said. “Teachers
will be better compensated, and our facilities will be in better shape.”
The two-year state budget, which went into effect July 1, contains $1.5
billion in new money for public education. It contains money to hire more
teachers, to expand pre school programs for 4-year-olds from low-income
families, and to help struggling students pass Standards of Learning
exams. Although the budget contains no recommendation for teacher raises,
lawmakers said the sharp increase in funding provides enough money for
school divisions to raise salaries.
The budget also authorizes: construction of two prisons; increased
payments to Medicaid providers; and expanded training programs for the
mentally retarded.
“Virginians will have a choice next year between someone who supported
these things and someone who didn’t,” Kaine said.
A number of other tax changes won’t go into effect until next year or
later.
Kilgore and many House Republicans are upset by the General Assembly’s
decision to cap car-tax relief at $950 million annually. It means that the
state will never meet its promise to erase the levy on the first $20,000
of an auto’s assessed value. Instead, relief will be frozen at its current
level of 70 percent .
Kilgore and House Speaker William J. Howell have called on the state to
complete the phase-out.
Gov. Mark R. Warner and other Democrats have challenged them to specify
how they would come up with about $500 million a year to pay for the
complete tax repeal.
Bennett said the overall tax plan approved by the General Assembly
provides relief for those who need it most. State income-tax burdens will
be eased on low-earning Virginians next year.
Starting July 1, the sales tax on food will be reduced gradually to 2.5
percent from 4 percent .
As for the increases going into effect today, Bennett predicts that
most Virginians won’t even notice them.
“I doubt most people realize what they pay in sales tax,” he
said
