Commentary

Two words for local governments considering keeping windfall car tax collections: Jim Gilmore

May 20, 2022 12:04 am
vehicle tax reminder letter

(iStock / Getty Images Plus)

You’ve got to hand it to Jim Gilmore: the Republican former governor knew a winning issue when he saw it.

In 1997, Gilmore and his political team came up with the most potent three-word, perfect-for-bumper-stickers campaign mantra I’ve ever seen. “NO CAR TAX.” It was the rocket fuel that propelled him into the Executive Mansion.

It needed zero explanation, at least not to any vehicle owner who had already paid through the nose to buy the car, maintain it, insure it and fuel it, yet still had to stroke checks for hundreds of dollars — maybe even more for the most bougie of rides – just for the privilege of owning it. The rates varied by locality, but no one in any of the 133 cities or counties that imposed the levy considered it cheap or fair.

It was universally despised.

Twenty-five years later, it’s no less loathed – especially as taxpayers open mail from their city or county revenue commissioners’, treasurers’ or finance department offices to see that what they owe on their cars and pickup trucks is anywhere from one-fifth to one-third greater than just a year ago.

Say what?

Like everything else, blame COVID-19. The pandemic created profound cutbacks in car manufacturing worldwide, resulting in shortages that have driven sticker prices for new vehicles to extortionate levels and created an unprecedented demand — and insanely inflated valuations — for used cars, valuations on which the new taxes are based.

It didn’t take county and municipal officials across the state long to read their constituents’ reactions.

There’s been strong reporting the past couple of weeks about ways elective and appointed in those localities have dealt with the blowback from taxpayers who see unprecedented personal property tax spikes at the same time the worst inflation since the 1970s drives up costs of basics and sent a shock through the retailing sector because of a sharp drop in discretionary spending.

Chesterfield County quickly realized that banking this year’s projected $22 million windfall from the higher vehicle valuations was a nonstarter. Chesterfield’s revenue commissioner, Jenefer Hughes, told VPM that the county’s Board of Supervisors acted swiftly to rebate the money to taxpayers by halving the county’s vehicle license tax from $40 to $20.

Even so, the car tax still provokes civic anger — a grievance that, as (former Gov. Jim) Gilmore proved, can translate into a mighty political movement.

– Bob Lewis

In Virginia Beach, the city council has approved applying a 75 percent ratio to personal property tax bills, meaning they will be reduced by one-fourth, offsetting the higher valuations, according to a report by Radio IQ/WVTF.

The Richmond suburb of Henrico County has already postponed its payment deadline for the first of two personal property tax installments from June 6 to Aug. 5. The Board of Supervisors intends to take up a separate piece of legislation over the summer that would apply a credit to their second payment that, as Henrico’s finance director, Sheila Minor told WVTF, amounts to “basically giving back that surplus.”

Others are still figuring things out and have made no overtures yet to rein in the car tax bonanza, including Roanoke, the public radio station reported. And to those localities, time’s a-wasting, and the consequences of inaction can be politically crippling.

How crippling?

Ask U.S. Rep. Don Beyer. In 1997, Beyer was the sitting lieutenant governor and the Democratic nominee for governor. At that time, he was the only Democrat holding a top state office chosen by voters statewide, but Democrats still enjoyed hegemony by razor-thin margins in the General Assembly. His race against another top statewide elected officeholder, Gilmore, then the attorney general, was initially expected to be a tight one.

“NO CAR TAX” irreversibly changed that. Initially, Beyer battled against the powerful political tide by pointing out — correctly, though in vain — that it was not sustainable fiscal policy. Eventually, however, Beyer attempted something of a “me too,” countering Gilmore’s promise to wipe out the locally imposed tax on the first $20,000 of a vehicle’s value with a $250 state tax credit on household incomes of $75,000 or less.

Gilmore won the election with 56 percent of the vote. A year later, majority General Assembly Democrats grudgingly acceded and Gilmore’s Personal Property Tax Relief Act was passed. “Promises made, promises kept,” Gilmore said in signing his centerpiece policy accomplishment into law.

The law prescribed a gradual phaseout of the tax, or at least that’s what taxpayers would see. But the way it worked was that rather than end the tax, localities would collect the tax only on vehicle valuations exceeding $20,000 and the state would reimburse those cities and counties for its lost revenue.

Initially, it worked fine when the first-phase reimbursement levels were low during the rip-roaring economic expansion of the 1990s largely fueled by the embryonic and overheated internet technology sector. When the “dot-com bubble” burst and created a recession at the turn of the 21st century, it became the bane of Gilmore’s final year in office.

With quarterly general revenue collections for the 2001 and 2002 Virginia fiscal years falling below those from the preceding year and monthly collections trailing budgeted growth estimates 17 out of the 24 months in calendar years 2001 and 2002, Gilmore battled the General Assembly to keep his car tax phaseout on track.

The skirmish created an internal rift between the governor and allied Republicans in the House of Delegates on one side and, on the other, GOP senators who agreed with Democrats that the full car tax phaseout was fiscally untenable. The feud helped Democrats reclaim the offices of governor and lieutenant governor in the 2001 election. And Gilmore, in his final weeks in office, conceded that the car tax repeal could not advance on schedule.

By 2004, a tax restructuring bill pushed by Gilmore’s successor, Mark Warner, that permanently capped the car-tax phaseout was approved by a GOP-dominated legislature.

Even so, the car tax still provokes civic anger — a grievance that, as Gilmore proved, can translate into a mighty political movement. Decision makers in local governments still on the fence about whether or not to just harvest this year’s car tax windfall or return it to the taxpayers would do well to remember that.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Bob Lewis
Bob Lewis

Bob Lewis covered Virginia government and politics for 20 years for The Associated Press. Now retired from a public relations career at McGuireWoods, he is a columnist for the Virginia Mercury. He can be reached at [email protected]

MORE FROM AUTHOR