Gilmore repeals car tax relief
By Mary Claire Whitaker
Flat Hat Staff Writer
In a departure from his proposed five-year phase out, Republican Gov. James Gilmore decided not to increase car tax relief this week due to the worsening economy. The tax refund will remain at its current 70 percent, although Democratic Gov.-elect Mark Warner hopes to raise it to 100 percent by the end of his term.
The governor's commitment to the timely fulfillment of his 1990 "No Car Tax" campaign promise has been blamed for this year's first-ever budget impasse in the Virginia General Assembly.
"While no numbers have been released by the state at this point, it's pretty clear that state revenues are going to be short for this year," Vice President of Management and Budget Samuel Jones said.
President Timothy Sullivan echoed Jones' interpretation of what he called the "grim" economic situation.
"While any savings will help," Sullivan said, "we're in a time so difficult that no single action is going to significantly soften the blows that I'm afraid are going to fall on us within the next year or so."
State employees did not receive raises last year, construction on several college campuses has halted and state legislators doubt that Gilmore's promise of retroactive pay increases will be fulfilled anytime soon.
"I don't see how raises can be accommodated at this stage," Delegate Vince Callahan (R, Fairfax) said in the Nov. 11 Richmond Times-Dispatch.
At a conference in Charlottesville Wednesday, business professor Roy Pearson named factors that accelerated the downturn.
"Household debt is at all-time records ... which makes consumers very skittish," Pearson said in yesterday's issue of The Daily Progress (Charlottesville). "The stock market hasn't done very well in the last year. The stock market has definitely cut into household wealth."
Pearson added that the Sept. 11 attacks affected spending morale, which decreased sales tax revenue and affected the overall economy, which he expects to diminish even more.
Jones also partly attributed the problem to the Sept. 11 attacks, saying that they reduced tourism in Northern Virginia, leading to reduced sales and income tax revenue, among other sources.
Pearson predicted that, like the recession of the early '90s, the current slump will last less than a year -- through the second or third quarter of 2002 -- and that its effects will be so profound.
"The fact that the government has acted and is going to act some more is why we're looking for recovery to be better than in 1990 and 1991," he said.
The Federal Reserve's actions have led to a decrease in mortgage rates. The federal government is sending out recovery packages, although the impact this will have on the College is unclear. According to Jones, the College is already thinking about the economy's impact on next year's budget.
"We have started some informal reviews of where we can go and what we might have to do if we have to take a reduction," he said. "We continue to work with the folks in Richmond to try to understand the situation better."
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