The Virginia House of Delegates passed a compromise tax bill yesterday, providing for a revenue increase of nearly $1 billion and marking the first step to end the budget impasse that has plagued this year's General Assembly session.
The bill passed by a 52-46 vote, coming only after several Republican delegates joined Democrats to support the bill. The Senate Finance Committee will consider the bill this morning.
Legislators and observers said the General Assembly now has an opportunity to end the impasse, but they added it could vanish if the Senate or Gov. Mark R. Warner pushes for an additional tax increase.
"This is a major step forward," University Politics Prof. Larry J. Sabato said. "If the Senate goes along, we'll be well on the way to having a budget."
Sabato added, however, that Senate disagreement would be a major blow against efforts to forge a compromise.
"If the Senate comes back and says, 'We want even more,' then we're back to deadlock," Sabato said.
Sen. R. Creigh Deeds, D-Charlottesville, said the bill's passage was a "positive step" but that the Senate reaction would be determined by the information presented at tomorrow morning's meeting.
"We'll have to wait and see," Deeds said.
The tax plan, which contained many elements of Warner's original plan, included several tax reduction measures, including abolishing the estate tax, increasing certain income tax exemptions and reducing the sales tax on food by a half-cent.
Debate, however, centered on the revenue-raising measures, which would increase the sales tax from 3.5 to 4 percent and the cigarette tax from 2.5 to 25 cents per pack and eventually 30 cents per pack.
Del. Rob Bell, R-Charlottesville, who voted against the bill, said the tax increases were too large, especially in the face of uncertainty over the Senate's willingness to accept a compromise.
"I thought this tax hike was too big, especially given that the Senate has not said whether this will be enough for a final deal," Bell said.
Supporters of the bill, however, said the money was needed to fund what they call Virginia's "core responsibilities" of education and transportation.
"It's clear we need more money, more revenue for services we're required to pay for," Deeds said.
Warner originally proposed a tax increase of approximately $1 billion. The Senate went even further, proposing an increase of more than $3 billion. The House first did not support any tax increase but later proposed one of about $500 million through elimination of tax breaks for businesses.
The Senate eventually lowered its proposed increase by eliminating an income tax increase, but the houses could not agree until 17 House delegates, citing growing constituent pressure, announced their support for the compromise bill.
At the last minute, the House agreed 49-48 to an amendment by Del. Thelma Drake, R-Norfolk, who is a realtor, to eliminate a proposed recordation tax increase paid by homeowners buying a home.
Bell and Sabato characterized the recordation tax increase as significant but nowhere near as significant as the sales and cigarette tax increases.
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