DATE: Wednesday, November 26, 1997          TAG: 9711250023

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Editorial

                                            LENGTH:   66 lines

NO CAR TAX? NOT SO FAST NO FREE LUNCH

Well, that didn't take long, did it?

Sixteen days after the Nov. 4 election, Senate budget analysts weighed in on the cost of erasing the personal property tax on cars. They found (Surprise!!!) that it is likely to cost more than Gov.-elect James Gilmore suggested during his campaign.

``Obviously, if the cost is going to be much higher than anticipated, we're going to have to scale it back,'' responded Senate Republican Leader Joseph B. Benedetti of Richmond.

Obviously. But try telling that to taxpayers in several localities who have already begun thumbing their noses at car tax notices that are being mailed by commissioners of revenue.

Apparently more than a few Virginians thought all they had to do to obliterate the nasty bill was to vote Gilmore into office.

It's not nearly so simple.

The numbers aren't carved in stone because estimates never can be. But the nonpartisan Senate Finance staff - using the best available information - concluded that Gilmore's plan to abolish the tax on cars assessed at $20,000 and under will cost beteen $404 million and $531 million for the first two years of the phase-in.

That compares with the $260 million Gilmore estimated would have to be allotted during the period.

Similarly, according to the budget analysts, the total cost of a five-year phase-in will be between $2.1 billion and $2.8 billion. Gilmore estimated that bill at $1.6 billion.

And don't forget, since the number and value of cars on the road will presumably keep going up even after the phase-in is complete, the price tag will continue to rise annually.

That promises trouble ahead. To be sure, state revenues are expected to grow by $1.1 billion beyond costs over the next biennium, if the economy continues its stellar performance. But at some point down the road, revenues are certain to dip. What then? The state can back off its commitment to localities, which depend on the personal property tax for about 15 percent of their revenues, but only at tremendous risk to local services.

Lawmakers in both parties appear committed to starting down the route to abolishing the car tax. Based on the election results, they may believe they have little choice. But we believe that Virginia has pressing needs that should have a higher priority than phasing out the car tax. And it is important that Virginians realize the trade-offs.

If the Senate Finance estimate is correct, close to half of the $1.1 billion surplus will go to tax relief. A 3 percent annual salary increase for state employees will cost another $346 billion. And moving back to the sound practice of paying for some building projects out of current revenues - not just issuing debt, as the commonwealth has been doing in recent years - would require about $290 million for the biennium.

So much for the surplus.

Still unfunded under that scenario are a remedial education program promised by Gov. George Allen to support new standards of learning ($31 million), a mental health investment promised the federal government (at least $45 million), Gilmore's campaign commitments to the hiring of 4,000 new teachers ($177 million) and a major college scholarship program ($120 million), and literally dozens of other worthy projects.

Lawmakers must spend the next weeks and months trying to reconcile the irreconcilable. We do not envy them the task. Perhaps they might start by printing up another set of bumper stickers to match the ever-popular ``No Car Tax.''

The new ones should read: ``No Free Lunch.''

Send Suggestions or Comments to webmaster@scholar.lib.vt.edu