DATE: Thursday, July 24, 1997               TAG: 9707240423

SECTION: LOCAL                   PAGE: B9   EDITION: FINAL 

SOURCE: BY LEDYARD KING, STAFF WRITER 

DATELINE: RICHMOND                          LENGTH:   69 lines

ECONOMISTS, INVITED BY GILMORE, PRAISE PLAN TO NIX PROPERTY TAX

A group of economists, invited by Republican gubernatorial nominee James S. Gilmore III to review his proposed elimination of the personal property tax, have pronounced his idea fiscally sound and fundamentally fair.

And, hoping to seize on an issue Democrats have championed as their own, they said it would befriend the environment.

Fiscally sound because phasing out the annual property tax on most trucks and cars would stimulate economic growth.

Fundamentally fair because Gilmore's plan would affect every family with a vehicle. When fully phased in over five years, the plan would cover taxes on the first $20,000 of a vehicle's value.

And environmentally friendly because the penny-conscious drivers would be more likely to trade in their exhaust-spewing, gas-chugging clunkers for newer, efficient models.

``It's a bad tax. The people know that and it's time the politicians in Richmond knew that,'' said George Mason University Economics Professor Robert D. Tollison. ``We don't tax washers and dryers. Why should we tax trucks and cars?''

The economists held a news conference Wednesday to praise Gilmore's plan as a tax reform plan that ``gets it right,'' and to refute Democratic charges that it would favor Virginia's wealthiest localities.

They were led by James C. Miller III, a former budget office director under President Reagan and a two-time unsuccessful GOP candidate for U.S. Senate in Virginia.

The economists gathered four days after Gilmore's opponent, Democratic Lt. Gov. Donald S. Beyer Jr., unveiled his own proposal for tax relief: a state income tax credit of as much as $250 for couples and $150 for individuals.

Beyer pitched the proposal as a way to offset the cost of the personal property tax on trucks and cars that polls show has become the state's most singly hated tax.

Beyer and other Democrats have blasted Gilmore's plan as fiscally irresponsible because they believe the state could not afford to reimburse counties and cities for the millions they would lose if the personal property tax vanished.

The economists invited by Gilmore also dispute the Virginia Municipal League's analysis of the Gilmore plan's cost. The VML, which represents the state's 95 cities and opposes the tax repeal, says it would cost the state $1.3 billion annually to reimburse local governments for those lost revenues once the plan is fully phased in. Gilmore says - and the economists agree - the figure is closer to $620 million.

The reason the estimates are so broad is that the VML has factored in a 9 percent annual growth in personal property tax revenues, an increase that VML fiscal policy director Betty S. Long says is reasonable.

The economists Wednesday said they hadn't had enough time to thoroughly review Beyer's plan, but Miller called it ``a bit slap-dash to me.''

Gilmore's form of tax relief is more progressive than Beyer's, the economists contend, because the poor have a greater percentage of their wealth tied up in vehicles than the rich do.

In one example shown Wednesday, a family with an income of $80,000 owns two cars with a combined value of $15,000.

The annual personal property tax bill would be $452, or 0.56 percent of their gross income. A family with a $20,000 income which owns two cars with a combined value of $7,500 would have a tax bill of $226, or 1.13 percent of their gross income.

The model was based on a statewide average tax rate of 3.01 percent. Rates vary from locality to locality.

Under Beyer's plan, Virginia's poorest residents - about 100,000 of them - wouldn't even get tax relief because they wouldn't qualify. They're too destitute to pay taxes now.

And most families in rich counties, like Fairfax, earn too much to benefit from Beyer's proposed credit.

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