DATE: Thursday, April 10, 1997              TAG: 9704100438

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY WARREN FISKE, STAFF WRITER 

DATELINE: RICHMOND                          LENGTH:   79 lines

BEYER WANTS TAX CUT FOR BUSINESS<

Hoping to end speculation that he would raise taxes if elected governor, Lt. Gov. Donald S. Beyer Jr. on Wednesday proposed freeing 95 percent of Virginia's businesses from paying state corporate taxes.

It was the second tax cut put forth this week by Beyer, the lone Democrat seeking nomination for governor. On Monday, he vowed to work for repeal of the 4.5 percent state sales tax on nonprescription drugs.

The cost of the two tax cuts would be at least $50 million, he said. That expense is less than one third of 1 percent of the state's total annual tax-induced revenue.

The proposals come amid mounting Republican charges that Beyer cannot accomplish his agenda without increasing levies. Beyer has proposed ambitious plans to raise teacher salaries to the national average and provide four-year college scholarships to high school students with B averages.

Beyer has spurned challenges to sign a pledge not to raise taxes, calling it ``a cheap gimmick.'' Even so, he issued his strongest statement on the issue Monday night. ``I do not intend to raise taxes and I will not raise taxes,'' he said during an appearance on a radio talk show hosted by former Gov. L. Douglas Wilder.

At a news conference Wednesday, Beyer cited projections that state revenue will grow by $2 billion over the next four years because of economic expansion. He expressed confidence that the new revenue would pay for his programs and tax cuts.

Beyer proposed eliminating the corporate tax for all businesses that annually make less than $5 million in gross sales and earn less than $50,000 in net profit. He said the plan would lift the tax burden for 95 percent of Virginia's 131,000 businesses.

``These are Virginia's home-grown businesses, dynamic entrepreneurs that are creating most of our jobs,'' he said. ``We want to promote family businesses, mom-and-pop stores, fledgling technology companies and smaller companies that will grow as we continue to attract major corporations.''

Under Beyer's formula, a small business would receive a tax credit of up to $3,000. ``That's money they can use to grow the company,'' he said.

The plan would cost the state about $30 million, Beyer said, or 7.3 percent of the $410 million the state receives each year from the corporate tax. Almost all of the revenue comes from large businesses that wouldn't be affected by the tax cut.

Nor would unincorporated businesses, such as sole proprietorships, be affected. Only Chapter C and Subchapter S companies would benefit from Beyer's proposal.

REMOVING THE sales tax on non-prescription drugs would cost the state at least $20 million a year, Beyer said. The General Assembly voted in 1990 to repeal that levy, but enactment has been delayed repeatedly because of tight state revenue.

The tax is now scheduled to be rescinded on July 1, 1998, unless the General Assembly changes its mind again. Beyer said he would strongly urge lawmakers to go forward with the repeal.

Attorney General James S. Gilmore III - the lone candidate seeking the Republican gubernatorial nomination - said Wednesday that Beyer is not credible on taxes. ``Don Beyer promising tax relief is like Dr. Kevorkian selling life insurance,'' he said, referring to a Washington Post article last month that suggested Beyer might seek tax increases to pay for his programs. Beyer's campaign has said the story was inaccurate.

Gilmore, while also saying he would not raise taxes, also has declined thus far to sign a no-tax pledge. He said he will reveal his own fiscal agenda on April 29, when he officially declares his candidacy.

ON ANOTHER tax issue, Beyer said he doubts a business gross receipts tax can be repealed anytime soon. Local governments rely heavily on the Business, Professional and Occupational License tax, or BPOL, which brings in about $310 million a year.

``I don't see any way we can make the critical investment in Virginia schools and repeal this in the next couple of years,'' Beyer said.

The legislature last year exempted the state's smallest businesses from the tax, which is unpopular because it is based on gross receipts, not profits. MEMO: The Associated Press contributed to this story. ILLUSTRATION: Color photo

Lt. Gov. Donald S. Beyer Jr.

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