DATE: Sunday, May 18, 1997                  TAG: 9705170025

SECTION: COMMENTARY              PAGE: J5   EDITION: FINAL 

TYPE: Opinion
SOURCE: MARGARET EDDS

DATELINE: RICHMOND                          LENGTH:   83 lines

THE GILMORE GAMBIT TAX-CUT PLAN PROBLEMATIC BUT POPULAR

Asked last week about the general reaction to Jim Gilmore's plan to eviscerate the personal-property tax on moderate-to-low-cost cars, a friend at City Hall didn't hesitate.

``People are loving it,'' she said.

People may be. Economists and those who have to balance the state budget aren't.

The Democratic claim that Gilmore's idea is ``a declaration of war on public schools'' is hyperbole. But Gilmore's assertion that the state can pick up much of the tab for a $1.3 billion local revenue source with no pain to anyone promises to be just plain wrong.

To the credit of Gilmore, the GOP candidate for governor, he's put an innovative proposal on the table. Politically, he's adopted a populist stance that resonates with every taxpayer who's flinched at scribbling out a check for the clunker or the cream puff in the driveway.

But the odds of his plan working out with as little fuss or muss as Gilmore suggested at his recent campaign kickoff are about as great as the likelihood of the federal budget being balanced with all entitlements intact.

Which is to say, next-to-nil.

For the record, Gilmore proposes to eliminate local property taxes on the first $20,000 of the value of personal cars and trucks. He would phase in the cut over five years. Localities would still assess the vehicles, but they would send the bill to the state rather than the owner. The state would reimburse localities dollar-for-dollar, using revenues generated by economic growth.

Taxpayers keep their money. Localities get theirs. An ``economic windfall'' pays the state's tab. Everyone goes home happy.

There are a number of places where this rosy scenario could get soiled. One of them is the likelihood that Gilmore is underestimating the pricetag. Another is the possibility that economic growth won't match his expectations.

Any analysis starts with the caveat that no one truly knows what the plan will cost. That's because the estimate is built on a pyramid of guesswork. But starting with one known fact - state tax officials say localities levied $1.2 billion in personal property taxes in 1995 - and applying conservative estimates from Gilmore and others, it's hard to see how the $620 million allotted in fiscal 2003 (the year the plan fully takes effect) is enough.

Here's how the calculation works. Recent growth rates should boost levies to about $1.3 billion in 1996. An estimated three-fourths of that - or $975 million - comes from vehicles. An estimated 80 percent of that - or $780 million - comes from non-commercial vehicles. And finally, an estimated 90 percent of that - or $702 million - comes from the first $20,000 of value.

That's $82 million more than the $620 million that Gilmore proposes the state allot for tax relief when the cut is fully effective in its fifth year. There's more potential trouble in the fact that the calculation doesn't account for population growth. More people, more cars. More cars, more taxes revenues for the state to reimburse.

Boyd Marcus, the respected campaign consultant who helped develop Gilmore's tax plan, defends the figures as reasonable estimates, based inescapably on guesswork. He notes that relief will not be granted unless revenues justify it.

If the campaign has underestimated the cost, he said, ``all that changes is we don't get to $20,000 in the fifth year, we get to (hypothetically) $17,000, and it takes to the sixth or seventh year to get to $20,000.''

Similarly, if Gilmore's assumption of record-breaking 6.2 percent growth in state revenues over the next four years proves faulty - and several prominent state economists predicted last week that it will - the plan can be scaled back accordingly, he said.

These are yard-wide qualifiers. They may have escaped the public's notice in the early enthusiasm for Gilmore's pledge to wage war on the property tax. Even if Democrats succeed in calling some of the specifics into question, they can't count on putting Gilmore's tax plan to rest.

That's because the appeal of his premise is intact. Gilmore contends that if the state reaps substantial new revenues from economic growth over the next few years, a substantial portion of the money should go to tax relief.

That is philosophically at odds with Democrat Don Beyer's assertion that most - though not all - of such growth should be invested in roads, schools, prisons and other state programs.

Beyer can make a defensible case that some state needs have been neglected. But he'll have to lay it out convincingly.

As my friend said, grumbling taxpayers at City Hall last week had a clear reaction to Gilmore's plan. They were loving it. MEMO: Ms. Edds is an editorial writer for The Virginian-Pilot.

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