Stateline Story

Virginia Rural Areas Slighted By Car Tax Relief

  • February 19, 2003
  • By Robert Cunard and Sharon Ramos

When it comes to phasing out the state's car tax, most Virginians would say don't look a gift horse in the mouth. But some legislators, especially from rural areas, are ready to give that horse a swift kick.

They say rural areas got shortchanged by the state's 1998 decision to slash the personal property tax on vehicles. A computer analysis shows why they feel that way.

The suburban counties of Loudoun, Fauquier and Fairfax in Northern Virginia have received more than $1,500 per household in car tax relief over the past four years, the analysis found. But such rural counties as Lee, Henry and Grayson got less than $150 per household.

"Two-thirds of the car tax relief goes to seven localities," said Sen. William Roscoe Reynolds, D-Martinsville. He has sponsored a bill to repeal the Personal Property Tax Relief Act of 1998 -- the Republican-inspired law that promised to eliminate the car tax.

"It's clear to me that it (car tax relief) was a mass transfer of money from less-urban Virginia to urban Virginia," Reynolds said.

For the time being, car tax relief is here to stay. The General Assembly has killed Reynold's proposal and six other bills to repeal or roll back the car tax cut. But the hard feelings among the bills' supporters are likely to resurface as the General Assembly grapples with the state's multibillion-dollar budget deficit.

The car tax is levied by local governments -- cities, counties and towns. The 1998 law, the centerpiece of Republican Jim Gilmore's gubernatorial campaign and administration, ordered local governments to reduce the car tax bills by a certain percentage each year -- with the state making up the difference.

The car tax cut is currently at 70 percent; consequently, the state last year had to compensate localities a total of $845 million. Those payments have exacerbated Virginia's budget problems, which were triggered by the sagging economy and lagging tax revenues.

To plug the budget deficit, the state government has cut various services -- for example, by closing 12 Department of Motor Vehicles offices. (Gov. Mark Warner and the General Assembly have since found money to reopen those offices.) Some rural areas feel they have been disproportionately hurt by the budget cuts. In effect, they say, they have the worst of both worlds: Rural counties got the least benefit from the car tax relief but took a big hit from the state budget cuts.

"There is no question in my mind that the car tax [reduction] has had an unfair impact on rural localities," said Delegate Robert Hurt, R-Chatham. "We get the short end of the stick."

Hurt should know. He represents parts of Pittsylvania and Henry counties and the city of Martinsville. From 1999 through 2002, Pittsylvania County received about $418 per household in car tax relief; Martinsville, $290 per household; and Henry County, $146 per household.

Statewide, Virginians have saved a total of $2.3 billion on their car taxes over the past four years -- an average of $852 per household -- according to data from the Virginia Department of Taxation and the U.S. Census Bureau.

Suburban counties in Northern Virginia and around Richmond saved far more per household than the statewide average. Rural counties in Southside Virginia and the western part of the state saved far less than the statewide average.

Delegate W. Benny Keister, D-Dublin, represents Tazewell County, which has received about $410 per household in car tax relief, and Pulaski County, which has gotten about $253 per household. He said the car tax cut was unfair to Southwest Virginia: "It takes money away from that region."

Suburban officials say there's a logical reason why they got the lion's share of the car tax relief: Their residents had been paying far more in car taxes all along.

For one thing, suburbs tend to have high car tax rates -- more than $4.50 per $100 value in Fairfax and other Northern Virginia localities. In contrast, Henry County has been taxing vehicles at just $1.19 per $100 value. Moreover, suburbanites often own more expensive vehicles than rural residents.

Legislators from Northern Virginia make no apologies for how the car tax relief has benefited their constituents. They said the car tax deserved to be eliminated.

"The car tax is not justifiable as a matter of policy," said Sen. William C. Mims, R-Leesburg. "It's a recurring tax that has no bearing upon, or no relationship to, the use of a vehicle. Someone could have a car that they use only to go to church each Sunday, and they would take the same amount of car tax as someone who is using or driving 50,000 miles a year.

"So it's an unjustifiable car tax -- period. We shouldn't make policy based upon which counties get more or less. We should make policy based on taxes where it's justifiable."

Delegate Kristen J. Amundson, D-Mount Vernon, agreed with rural lawmakers that Northern Virginia benefited more from the car tax cut: "They're absolutely right."

But in funding for schools and transportation, Northern Virginia gets shortchanged, she said.

Delegate Richard H. Black, R-Sterling, said Virginians as a whole support car tax relief. "Car tax repeal is popular with the people in every corner of Virginia," he said.

"Now, it's not popular with politicians in every corner. But if you ask the man on the street if he thinks he should be paying the car tax, he will tell, 'No!' -- whether it's in Loudoun County or Buchanan County. The people don't like it, and they want it totally abolished."

Many rural legislators agree.

Delegate Daniel W. Marshall, R-Danville, and Sen. Charles R. Hawkins, R-Chatham, conducted a survey and found that even rural Virginians want to kill the car tax. "People still support repealing the car tax," Marshall said.

Reynolds said that's because most people don't know the costs of the car tax reduction. "I do not believe the majority of Virginians understand the havoc it is playing with local governments' budgets."

Besides Reynolds, Delegate Mitchell Van Yahres, D-Charlottesville, proposed repealing the car tax phaseout. His bill died in committee, as did less drastic measures:

  • Delegate James M. Shuler, D-Blacksburg, wanted to roll back the car tax cut from 70 percent to 50 percent.
  • Sens. R. Edward Houck, D-Spotsylvania, and Phillip P. Puckett, D-Tazewell, suggested scaling it back to 47.5 percent.
  • Delegate Clarence E. Phillips, D-Castlewood, proposed trimming the tax cut to 27.5 percent.
  • Delegate Watkins M. Abbitt, I-Appomattox, recommended rolling back the tax cut to a level to be based on the state's finances.

Reynolds, who has been a legislator for 18 years, said the car tax repeal was "the most irresponsible policy that I've seen adopted while I've been a part of the General Assembly."

He blames the car tax relief program for much of Virginia's budget problems.

To fund the tax relief, the state has had to cut money for law enforcement and mental health services, Reynolds said.

As a result, state services are in a "downward spiral," he said. "The right way to go is for our government to fund basic services to its citizens."