Gov. Timothy M. Kaine's last budget includes more spending cuts ordained by the continuing revenue shortfall and one big surprise: a 1 percent increase in the state income tax.
The proposed tax hike, which Republicans, including Gov.-elect Bob McDonnell, immediately declared a nonstarter, would forestall deeper reductions in spending and allow elimination of the deeply unpopular local "car tax," which the state has been subsidizing.
Repealing the car tax propelled Jim Gilmore to the governor's office in 1998, but fulfilling the pledge knocked a huge hole in the state budget and the General Assembly capped reimbursement to localities. Likening the status quo to a Rube Goldberg contraption, Kaine advocates substituting the income tax increase, which would go entirely to local governments.
Having already cut $7 billion from the state budget since March 2007, Kaine blanched at the prospect of plugging a projected revenue shortfall of $4.2 billion by 2012 entirely with budget cuts. The budget he unveiled Friday includes cuts to Medicaid, education and public safety along with 664 layoffs and a reduction in the state's pension contributions.
Although Kaine's tax stratagem has the virtues of transparency and equity, it also amounts to a billion dollar tax hike, which is anathema to Republicans (few assembly Democrats embraced it as well) and politically toxic in hard economic times.
The politically savvy Kaine knows that his tax hike is dead on arrival and puts the onus of sharply steeper cuts on McDonnell and assembly Republicans. While some of them complained that Kaine had complicated their task, they shouldn't have expected the moderate Democrat to craft a budget blueprint contrary to his principles, including seeking more income to avert even more draconian reductions in government services.
Having embraced no tax increases as a central tenet of party orthodoxy, McDonnell and his Republican assembly cohort have no alternative but to slash spending to the bone and perhaps beyond.