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Targeted tax increases on table

Lawmakers may consider some tax increases, user fees

By CHELYEN DAVIS

Date published: 11/19/2003

WILLIAMSBURG--The leader of the House Appropriations Committee says legislators may look at targeted tax increases to pay for Virginia's increasing health care and transportation needs.

Del. Vincent Callahan, R-McLean, said yesterday that he could support raising the tax on cigarettes to help pay for spiraling Medicaid costs and perhaps would also support changes to the gasoline tax to cover transportation improvements.

Medicaid in particular is taking an ever-increasing chunk out of the state budget--about $2 billion in the next biennium, Callahan said.

That, plus the fact that 2004 is not an election year, may make lawmakers more willing to raise the cigarette tax, a proposal they have rebuffed in years past.

"The need is obvious," Callahan said. "I'd certainly support something like that these are things out there that are options for people to look at user taxes is what we're talking about."

Callahan was speaking at the House Appropriations Committee's retreat in Williamsburg. Committee members are spending two days being briefed on the state of the economy and the budget.

Lawmakers expect to have to deal with a $1.3 billion shortfall in the next two-year budget. Callahan said yesterday the state would need revenue growth of more than 8 percent to balance the budget, which is unlikely.

That means legislators will have to make spending cuts or increase revenue. But many lawmakers, particularly House Republicans, are adamantly opposed to large-scale increases in taxes such as the sales or income taxes.

House Speaker Bill Howell, R-Stafford, is among them. He yesterday reiterated his opposition to a major tax increase, but seemed more willing to consider Callahan's position on "user" taxes on items like cigarettes and gasoline.

"Things like that are doable," Howell told reporters. "I'm not adamantly opposed to user fees, and a cigarette tax or a gas tax is a user fee."

Howell repeated his opposition to general tax increases, but added that he has promised Gov. Mark Warner to keep an "open mind" on tax issues this session.

Warner is crafting a slate of proposals to reform the state's tax system. He is expected to announce his tax reform plan right before or right after Thanksgiving.

While Warner has not released details of that plan, Republicans fear "tax reform" will mean "tax increase," and they've been vociferous in their warnings to Warner against proposing higher taxes.

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Date published: 11/19/2003