Gov. Timothy M. Kaine is proposing the elimination of the car tax in exchange for a 1 percent increase in the statewide income tax.
The estimated $1.9 billion raised by the increase in the state income tax, which would be given entirely to localities, would more than make up for the state car-tax subsidy to localities of $950 million annually, Kaine said.
It would be distributed in the same proportion as the car-tax subsidies are currently structured.
In announcing his plan to fill a $3.5 billion budget shortfall, Kaine called the car tax a "$950 million folly," saying legislators have only failed to act on it out of "political expediency."
Kaine would lay off 664 employees and eliminate 1,879 unfilled positions. This comes on top of 1,651 state workers laid off since 2007.
State employees would also be required to pay 1 percent of the employee contribution to their pensions under the Virginia Retirement System beginning July 1. The number would increase to 2 percent in July 2011.
The proposal also increases the retirement age of new employees from 50 to 55.
Kaine's proposal also reduces funding for administrative and support personnel in kindergarten-12th grade.
It reduces funding for higher education to levels not seen since 2006.
In public safety it proposes two upcoming trooper schools for the Virginia State Police and imposes cuts of 20 percent on local law-enforcement offices, including sheriff's offices. It imposes cuts of 16 percent on commonwealth's attorneys.
In Medicaid it proposes $419 million in cuts, including freezes on services and on provider reimbursement.
Governor-elect Bob McDonnell has said he would oppose any tax increase to fix the budget shortfall.
McDonnell takes office Jan. 16.
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