Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, December 3, 1994 TAG: 9412050038
SECTION: VIRGINIA PAGE: B1 EDITION: METRO
SOURCE: DAVID REED ASSOCIATED PRESS
DATELINE: LENGTH: Medium
Del. Richard Cranwell and other Democrats said Virginia's cities and counties may be left to pick up the financial burden if Allen's proposed $2.1 billion tax cut is adopted.
``I think local governments may be looking at a cocked gun,'' said Cranwell, a Vinton attorney who handles tax bills as the Finance Committee chairman.
Lt. Gov. Don Beyer said Allen's plan to compensate local governments for revenue losses from a business tax cut could be short-lived.
``You can see localities having reasonable heartburn over this,'' Beyer said in Blacksburg, where the Senate Finance Committee met Friday.
Cranwell said the tax cut could endanger the state's triple-A bond status. Virginia is one of only five states with the top financial rating.
But Republican senators defended the proposal.
``It's a fair plan and what the people want,'' said Sen. Walter Stosch, R-Henrico.
Allen's spokesman, Ken Stroupe, said, ``The governor's proposal to cut taxes is good government. It seems to me that after so many years of being a professional politician, Mr. Cranwell has forgotten what good government is.''
Sen. Joe Benedetti, R-Richmond, offered a kind of pressure-release valve. If spending demands make it impossible to compensate local governments fairly, he said, the General Assembly could give localities the power to increase the sales tax.
Increasing the sales tax 1 percentage point, to 5.5 percent, would provide $500 million, which happens to match the estimated state budget shortfall the General Assembly will need to cover in 1995.
But Benedetti said a sales-tax increase of 2.5 percent would be enough to cover the cost local governments would bear if the state eliminates the Business, Professional and Occupational License tax.
``I'm not advocating that right now, but it will be on the table,'' Benedetti said. ``We're in the position that that sort of thing at least has to be considered. It's going to be a very heavy blow to localities if they have to pick it up.''
Cranwell said localities are facing a double hit because they would lose the local gross-receipts tax on businesses and likely would lose more revenue when state spending is slashed. Half of the state's $8 billion annual general-fund budget goes to local governments.
Cranwell said proposing individual income and business tax breaks is ``probably an astute political move,'' but Allen's term will be over before the state has to pay for the five-year plan.
He said Allen is trying to look good so he can run for national office.
``When the big numbers kick in, they hope they're going to be residing north of the Potomac,'' Cranwell said.
Stroupe countered, ``Instead of worrying about Gov. Allen's future, he should be worrying about the future of his party in the General Assembly if he doesn't support this meaningful tax reduction for working families.''
Cranwell said he wants to see how Allen plans to pay for the plan before he decides how to deal with it. The governor will announce his budget proposal Dec. 19.
by CNB