Panel OKs estate tax repeal, sales tax holidays

By BOB LEWIS
AP Political Writer

RICHMOND, Va. - The tax-writing House Finance Committee gave overwhelming approval Monday to tax-relief measures that would end the posthumous levy on the estates of millionaires and briefly exempt back-to-school purchases each summer from sales taxes.

The estate tax repeal emerged on an 18-2 vote bound for a House floor vote this week.

Similar bills await action in the Senate, where leaders this year have voiced cautious support for a limited version of the measure. Gov. Timothy M. Kaine also said Monday it's time for Virginia to do as many other states have and end the estate tax or risk driving wealth out of Virginia.

The bill endorsed by the Finance Committee effectively ends the tax on the estates valued at $1 million or more effective July 1.

"We're already seeing Virginians move their domiciles to other states because of the estate tax policy here," Kaine said. Then he illustrated his point with a hockey allegory.

"It's as Wayne Gretzky says, `You don't skate to where the puck is, you skate to where it's going.'"

The House version comes as the state piles up hundreds of millions of dollars in surplus revenues in its general fund, which provides allocations for health care, public safety and education.

The proposal by Del. Robert Tata, R-Virginia Beach, would reduce general fund revenue in the fiscal year that begins July 1 by about $36 million, by $140 million in the second year, then $120 million each subsequent year, according to a fiscal impact statement by the Department of Planning and Budget.

The sales tax holiday proposal was endorsed 20-0.

It would apply to school supplies such as dictionaries and notebooks and to clothing and shoes, provided they sell for $100 or less. It also includes computer systems valued at $1,500 or less and computer software, hardware or handheld calculators worth $500 or less.

Under the measure by committee chairman, Del. Harry Parrish, R-Manassas, families with school-age children each year would be exempt from the 5 percent tax from the first Friday through the first Sunday each August.

Kaine called the sales tax holiday "a good concept" depending on how it fits into the budget. "The estate tax is a higher priority," he said.

Costs to the state's general fund for the three-day sales tax furlough each year are estimated to range from $2.9 million in the budget year that begins July 1 to $3.6 million for the 2011-12 fiscal year.

For local governments, the aggregate statewide costs would range from an estimated $800,000 the first year to $1.1 million five years later.

Fifteen other states already have back-to-school sales tax holidays, including North Carolina, Tennessee and Maryland, according to the DPB fiscal impact study.

The legislative tax cut proposals advanced at the same time a startup conservative organization, Americans For Progress, announced at a news conference it would air radio ads attacking tax increases that are part of transportation packages by the Senate and Kaine.

The ads, to run statewide, say that despite prosperous times and a state surplus approaching $1 billion, Kaine and the Senate propose competing tax packages of about $4 billion. It concludes with an appeal by former Del. Paul Harris, a Republican, for listeners to call their legislators and persuade them to oppose the plan.

With transportation projects backlogged, traffic congestion stifling the state's most populous areas and long-range remedial costs approaching $100 billion, Kaine and the Senate are pushing increases in fees, fines and taxes. They include higher taxes on car insurance premiums and car sales, and, in the Senate version, higher gasoline taxes. Proposals also call for more use of tolls and public-private partnerships.

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Bob Lewis has covered state government and politics since 2000.

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