Commentary

Keep the Car Tax Promise

By Stephen Moore
November 28, 2000
It seems like just yesterday that Jim Gilmore became a national cause celebre with his “No Car Tax” appeal. Gilmore proved that the great American tax revolt is alive and well in America. The bumper stickers and the yard signs shouting “KILL THE CAR TAX” could seemingly be located on every boulevard and parking lot in the state. Gilmore’s 1997 landslide gubernatorial victory proved to the skeptics, many of whom sit in the state legislature, that the most hated levy in the state of Virginia is the car tax.

Now some of those same legislative naysayers want to curtail the final phase-in of the car tax repeal. Gilmore should just say no. He must stand firm and keep his promise.

Simply put, delaying the car tax would be a betrayal of the voters who put him in office and would be a stain on a record of four years of accomplishment in Richmond.

So far roughly half of the hated car tax has been repealed. That’s expected to rise to 70 percent next year and then 100 percent the year after. If the truth be told, a lot of Virginians who voted for Gilmore are stewing over the fact that it’s taken this long to get rid of the car tax. After Gilmore’s election many residents thought the tax would be gone in the first year of Gilmore’s administration. Instead, we got a 4 year phase-out.

So here we are with car tax repeal opponents warning that the economy is slowing down in Virginia and hence revenues aren’t coming in at the brisk pace of recent years. Delegate James Dillard, a Republican from Fairfax says that halting the car tax repeal is the “right and reasonable thing to do.” No, James. Keeping your promise to the taxpayers is the right and reasonable thing to do.

Let’s set the facts straight here. You can count on one hand the number of states that have been as flush with cash as Virginia has in recent years. Last year the state had nearly double-digit growth in tax receipts, even with the car tax phase-out. Last year Governor Gilmore wasn’t exaggerating when he declared: “These aren’t good times for Virginia, they’re the best of times.” The right and reasonable thing to do last year was to devote the fire hose of revenues to fully phase out the car tax immediately. Instead, the money got spent.

Last year, according to the new report by the National Association of State Budget Officers, the Virginia general fund budget rose by — hold on to your hats folks — 10.6 percent. And remember, that’s in an era of virtually no inflation. This wasn’t a mere spending spree, it was a seven-course budget feast with champagne and caviar at the Ritz.

Only 4 state legislatures had a more voracious spending appetite last year than Virginia’s. Nor was the spending build up just a one year aberration: over the past 3 years the Virginia state budget has expanded by nearly 20 percent.

Somebody ought to inform the politicos in Richmond that gluttony is one of the 7 capital sins.

The idea that Virginia can’t find the money to balance the budget and repeal the car tax at the same time is absurd and even insulting. The car tax phase-out would deprive the state of just $300 million in revenues, but the state has a $900 million reserve from all the excess taxes we’ve all been sending to Richmond year after year. If Governor Gilmore and the legislature in Richmond could simply hold state expenditure growth to 4 percent in 2001-that’s more than the federal budget went up last year—the car tax repeal could proceed, and the budget would remain in surplus. So what’s the problem here? State legislators—Republicans and Democrats alike—have become so accustomed to obese budgets, they can’t fathom dieting on lean-cuisine for once.

Some of the car tax-repeal opponents say that a higher priority should be roads and schools. That’s obviously an emotionally appealing argument to suburbanites in Northern Virginia. But again it masks the fiscal reality in Richmond. A recent Virginia Institute for Public Policy study shows that Virginia has been pouring money into road building, smaller class sizes, school construction, and teacher pay raises. “It’s a myth that Virginia underfunds schools and roads,” the report concludes.

Now is the time for Governor Gilmore to fight for his legacy. The car tax can be ended this year without any new taxes and without any draconian cuts in high-priority government programs in Richmond. In the current political environment in Virginia, as in Washington, D.C., voters are putting a premium on politicians who keep their word. Republican Delegate Jack Rust of Virginia is dead right when he says: “We have to keep the car tax promise.” It really is that simple.

It would be a shame if the tax revolt that Republicans rode to victory in 1997 came back to bite them in 2001.

Stephen Moore is an adjunct fellow at the Cato Institute.