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Free Lance-Star reporter Chelyen Davis covers Virginia government.

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Chichester endorses Houck

Former state senator John Chichester, a Republican, today endorsed Sen. Edd Houck, a Democrat.

Chichester said Houck has valuable seniority in the Senate and a record of working across the aisle that is needed to help prevent Richmond from emulating the partisan gridlock of Washington.

Chichester in recent years has also endorsed Democratic gubernatorial candidate Creigh Deeds and U.S. Senate candidate Mark Warner. A full story on the endorsement will be in Friday’s Free Lance-Star.

But behind the endorsement looms the 2004 tax reform package. Houck’s opponent, Republican Bryce Reeves, has used Houck’s vote on that bill in mailers that say Houck voted for the “largest tax increase in Virginia’s history.” Reeves doesn’t mention the taxes cut in the bill; meanwhile, Houck is countering with ads accusing Reeves of opposing the tax cuts contained in the bill, without mentioning its tax increases. If you see a mailer that cites HB 5018, it refers to the 2004 tax reform bill.

In 2003, Moody’s credit rating agency threatened to yank Virginia’s AAA bond rating. Moody’s said the state had a structural imbalance in its budget — its incoming revenue wasn’t matching up to spending promises. The car tax cut, enacted under former Gov. Jim Gilmore, was a big part of the problem — it was costing more and more every year.

So then-Gov. Mark Warner, Chichester, and others crafted a tax overhaul. They proposed raising some taxes and cutting others. In the end, they raised the cigarette tax, the sales tax and the recordation tax. They also eliminated a tax deduction based on age for seniors over 65, except those seniors who met a means test.

They cut the food tax, and gave a bigger tax exemption for married couples. They raised the filing threshold for everyone and increased the income tax personal exemption.

Altogether the bill increased revenue by about $1.5 billion, including money saved through a $950 million cap on car tax reimbursements. Republicans who opposed it call it the biggest tax increase in Virginia history. Democrats — and the Republicans who supported it — say it saved Virginia’s bond rating and provided needed money for education, public safety and other state obligations.

It was a huge fight in Richmond, with Warner and the Chichester-led Senate against the House of Delegates. Both the Senate and the House were led by Republicans, but the House Republicans were of a more anti-tax bent than most of those in the Senate. The impasse lasted until May, when a group of House Republicans broke with their caucus and voted for the tax bill. The issue caused a rift in the Republican party that persists, in some ways, to this day.

You can read the bill itself, in its final form, here: http://lis.virginia.gov/cgi-bin/legp604.exe?ses=042&typ=bil&val=hb5018

I’ve also done some digging through the Free Lance-Star’s archives for stories from that time:

The impasse-breaking vote for the bill in the House: http://fredericksburg.com/News/FLS/2004/042004/04142004/1330282

The Senate’s vote for the bill: http://fredericksburg.com/News/FLS/2004/042004/04272004/1344104

Passage of the state budget after the tax bill: http://fredericksburg.com/News/FLS/2004/052004/05082004/1357097

Moody’s reaffirmed the bond rating after the bill passed:

http://fredericksburg.com/News/FLS/2004/052004/05282004/1380009

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