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Kaine Replaces Car Tax With Income Tax Increase

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By Peter Granitz

Virginia Governor Tim Kaine hopes to narrow the budget gap by replacing the state's car tax with an increase on the income tax. The tax increase could raise $2 billion a year for the Commonwealth. The permanent, 1 percent increase would be phased in and begin in the Spring of 2011.

It's separate from the budget Kaine is presenting today, which includes more than $1.2 billion in spending cuts. Kaine hopes the tax increase will narrow the more than $3 billion state revenue shortfall.

The cuts include slashing higher education by 26 percent, and sizable reductions in public safety and mental health services.

The plan needs to pass the Republican-controlled House. Incoming Governor Bob McDonnell campaigned on a pledge he would not support any tax increases.

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