Jim Gilmore called me the other day, and he was not a happy camper. The former governor was displeased about my July 6 column on “Firecracker Ed” Gillespie and his odd campaign pledge to bring “fireworks freedom” to the Old Dominion.
Buried in there was a brief aside that compared that signature issue to those from other Virginia gubernatorial candidates. Recall, Gilmore’s was “no car tax.” In 1997, he romped to the governor’s mansion with that simple and highly deceptive slogan.
The column called it “largely fraudulent.” And that’s what Gilmore, who since 2010 has headed a conservative think tank in Washington, D.C., wanted to pick a bone about.
Why “largely fraudulent?” That one’s easy — Virginians are still paying car taxes. On top of that, in recent years, the tax has been slowly and almost imperceptibly climbing.
More about that in a minute. First, let’s give Gilmore his say.
“When you wrote that, you needled me,” he said. “I kept my promise.”
“We had a five-year phase-out, and the governor only gets four years,” Gilmore said. “The phase-out was stripped when I left [office]. ... I’m very unhappy about it. The bad guys did this to you, but they don’t have the guts to take responsibility.”
The bad guys, Gilmore added, were state senators of the mid-2000s era.
“I didn’t stop my program. They stopped my program. Give me a second term and I’ll finish that up.”
Before we go any further, let’s consider some background on the issue.
First, the formal name of the levy is the personal property tax, and it’s assessed not only on cars, trucks motorcycles and boats but also on business equipment, mobile homes and airplanes.
Localities set the rates, which vary by jurisdiction and by the category of property. For example, in Roanoke the current rate on vehicles is $3.45 per $100 of valuation. In Salem it’s $3.25; in Franklin County it’s $2.36. And in Fairfax County, it’s a whopping $4.57.
The localities also set different rates depending on the type of property. In Roanoke, the rate on light airplanes (10 tons and under) is $1.06 per $100 of value; on bigger planes it’s 45 cents. On mobile homes it’s $1.22. Localities annually bill taxpayers based on the value of the property being taxed.
Like the tax on real estate, personal property revenue goes directly to a locality’s general fund, where it’s spent on essential services such as education, fire departments and police protection.
Anyway, in the late 1990s, the car tax was widely reviled, which is understandable. Cars are the most universal category of taxable personal property. The owner of a $20,000 vehicle back then, assuming a $3.45 tax rate, would have had to cut a $690 check to a local government each spring.
Gilmore exploited that widespread disenchantment with his ultra-simple “no car tax” campaign pledge, and in 1997 he ended up winning 56 percent of the vote to Democrat Don Beyer’s 43 percent. (There was also a Reform Party candidate in the race.)
Killing the car tax, however, proved to be anything but simple. That’s because it wasn’t a state tax but a local one. Outlawing the levy would starve localities of revenue they depended on. So the solons of Richmond decided they would replace the car tax revenue localities stood to lose.
But they didn’t replace all of it. Essentially, they passed a law eliminating car taxes on vehicles worth less than $1,000 — the state would pay all of that tax to the localities.
For vehicles worth more, they phased in reductions over five years. In 1998, the state replaced 12.5 percent of the localities’ lost car-tax revenues. The relief climbed to 25 percent in 1999; 47.5 percent 2000 and 70 percent in 2001. It was supposed to go to 100 percent (of the first $20,000) in 2002.
That never happened because of the 2001 economic downturn following 9/11. Instead, over Gilmore’s objections, the legislature capped the tax relief at 70 percent. But even if it had gone to 100 percent, costlier cars still would have been taxed. That’s because relief applied only to the first $20,000 of a vehicle’s value.
The result was, if you owned a $20,000 car and the rate was $3.45, in 2001 you would have paid $207 rather than $690. But if you owned a $30,000 car, you would have paid $552.
And because the local personal property tax rates were a lot higher in Northern Virginia, the savings were a lot bigger for car owners there. For that reason, many critics slammed the car tax plan as a giant transfer of wealth from people in poorer localities to car owners in richer ones.
Meanwhile, the state payments to localities combined with the economic downturn caused a series of state budget crises. Mark Warner, who succeeded Gilmore in 2002, spent the next four years dealing with those. The state’s “rainy day” fund nearly got emptied. The transportation trust fund, which is supposed to be earmarked for roads, got raided, too.
So in 2005, the General Assembly permanently capped what it was willing to pay in car tax relief to localities at $950 million annually. And in the interim, car prices — and values — have climbed. And that means the car tax relief rate has steadily dropped.
For example, take Roanoke. The state is still paying the city the same $8.076 million in car-tax relief reimbursements that it was paying in 2005. Today, that translates into 48.4 percent car-tax relief, compared to 70 percent 12 years ago, said city Finance Director Barbara Dameron. And it’s going to continue declining.
This means that if you own a $30,000 car in Roanoke next year, you’re going to be paying $701 in personal property tax on it. That’s 27 percent more than you would have paid in 2001.
“Quietly, by the bad guys, it’s being re-imposed,” Gilmore told me.
Gilmore’s correct that he bears no responsibility for what happened after he left office. But as governor, he didn’t eliminate car taxes. That was his promise. Reality interfered.
He reduced car taxes, but they never went away. The key part of his pledge — “no” — was never fulfilled.