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Mr. BURTON. I think that is a great challenge, and we will commit that recommendation to some of our colleagues.

Let me end my questioning by just saying or asking, how many administrations in the past 30 or 40 years have cut taxes in Virginia, and are you one of the first?

Governor GILMORE. We are the first. The previous Republican administration attempted a tax cut, but it was beaten back. Gov. ernor Wilder, before that, actually got through a tax cut, I think, on nonprescription drugs, but it was never funded. It was funded at the end of the last Republican administration, but it was modest. The first major initiative on tax cuts has been in this administration. It has been very difficult to do. There is no tradition of tax cuts in Virginia—none. So we are doing it now.

Mr. BURTON. Well, you are to be congratulated.

And, with that, I will yield back my time, and I guess we will go to Chairman Gilman.

Governor GILMORE. Thank you, Mr. Chairman.

Mr. GILMAN. Thank you, Mr. Chairman. I want to thank you for conducting this interesting series of discussions with our leading Governors.

Governor Gilmore, I appreciated seeing all the good things you have done in your State. If you had the choice of reducing a Federal tax, one Federal tax, which would you consider to be the most important that you would recommend?

Governor GILMORE. My thinking at this point is that I would avoid a targeted tax at the Federal level, and, instead, do an across-the-board tax cut. You can debate which or how much or in what manner, but I think that I would be hesitant to go and pick one tax at the Federal level, you see, because that doesn't sustain the Federal problem; that doesn't address the Federal problem.

The Federal problem is that taxes across the board are too high at the Federal level. When you add, of course, all taxes that are coming out, the FICA, and then put the rest of the income tax with it, it is just enormous. The income tax alone is at 20 percent. And I don't think you can reasonably reduce the 20 percent by going to any particular targeted tax cut at the Federal level.

We were able to do it in Virginia because we are a relatively lowtax State, and we wanted to address that which was hurting people the very most. I think what is hurting people the most in this country today is these high tax rates that are at the Federal level, Congressman Gilman.

Mr. GILMAN. You have a sales tax in Virginia, do you not?
Governor GILMORE. Yes, sir, we do.
Mr. GILMAN. And what is its percentage?

Governor GILMORE. The percentage of the sales tax in Virginia is 4.5 percent.

Mr. GILMAN. How do you feel about a national sales tax that has been suggested in place of some other taxes?

Governor GILMORE. No, I don't think adding taxes or trading them off is the answer. I think that trying to mix and trying to substitute one tax for another is probably not a good approach, and I would not propose a national sales tax at all. To the contrary, the objective here, I think, is to cut taxes, and I think cutting the income tax rates is the right answer.

Mr. GILMAN. And how do you feel about a flat tax that has been proposed?

Governor HUCKABEE. Well, I think that it is one offered reform that ought to be considered among the other proposals that are out there. I certainly have not embraced that concept yet, but I think that it has to be considered among all the other proposals.

But the objective of the exercise here that, of course, is a way of maybe changing the mix in terms of the type of tax burden that is before us, but the objective here should always be to reduce the burden of taxes to the greatest extent possible.

And I want to point out that the reason for it cannot be lost. It is to give people the opportunity to empower themselves, to improve their lives. We all understand that capital is what makes the world go around. It is the ability to define not only a person's quality of life, but the opportunity to get themselves a leg up and be independent. We should be striving for all Americans to be independent of the government.

Mr. GILMAN. Well, I want to thank you again, Governor, for coming before our committee and for your great thoughts on what you did with your tax structure. I think we will benefit from it. Thank you, Governor.

Governor GILMORE. Thank you, Congressman Gilman. Mr. BURTON. Thank you, Chairman Gilman. Mrs. Morella. Mrs. MORELLA. It is a great pleasure to have you before us, Governor Gilmore. I have got great admiration for you, and I know we have worked together across the river on mutual concerns.

I guess I would like to ask you that: Do you work with the Governor of Maryland, and how do you interface with the District of Columbia? And would you make any suggestions about how relationships could be improved or enhanced?

Governor GILMORE. Your question was, do I work with the Governor of Maryland? Yes. It is strictly business, but we do have, I think, the ability to work together when we think that it is of mutual benefit to the people of Maryland and the people of Virginia. We have worked together, I must say, on our efforts to build the Woodrow Wilson Bridge, the Federal bridge, which is going to be in the river very soon now. We are working together to try to achieve that, and he and I have worked together on some areas in the environment as well.

With respect to the new Mayor of Washington, DC, I met him for the first time the other night, coincidentally, by the way, at that very same dinner party that I made reference to earlier. And I am confident that we are going to be able to find ways to work together to help the people of this community.

I must tell you, however, that my aspiration in life is to draw the Commonwealth of Virginia together as one unified State. It is a very difficult thing to do because we are so very big and so very diverse, but particularly so very big. When you get out to Lee County, where I happen to have been several days ago, you are west of Detroit, MI. So you have to think about how big this State is.

So, in consequence, to come to the point, northern Virginia should be a wonderful partner with Maryland and with Washington, DC, and I aspire to that. But they are not part of a region. They are part of Virginia, and we are working very hard to make sure that we include them intimately and carefully in everything that we are doing in the State, but I believe that Virginia, Maryland, and the District can work together in a variety of ways. For example, an Olympic bid, I suspect we are going to be working together on that as well.

Mrs. MORELLA. You made a lot of accomplishments with regard to education, particularly higher education. I must say I think you have got some quite good programs in terms of job training programs. Would you like to comment on any of those? And high technology? Some of those things, I think, can be regional. I mean, we can work together in terms of doing some of the training. I wondered if you might want to explain some of the achievements in terms of higher education particularly, or even secondary education, because I think that is so much a part of this work force that you talk about, and it is so much a part of the growth and development.

Governor GILMORE. We are very proud of our higher education system in Virginia. It contains landmark universities such as, for example, the University of Virginia, Virginia Tech, and William and Mary-national quality universities.

Mrs. MORELLA. One of my sons went to Washington and Lee.

Governor GILMORE. Oh, Washington and Lee, one of our excellent private schools that we have in Virginia as well, of which we have a large number.

So higher education in Virginia is a great value, and we have been very successful. I am emphasizing right now the importance of the recognition that Virginia has a higher education policy, and that is to make higher education a high value and very accessible to the young men and women of Virginia. As such, we need to remember that our colleges and universities are a part of the public policy of Virginia, which places a very high importance on higher education. Therefore, they must be accountable to the people of Virginia, through their government, in order to effectuate that. Our quality must be maintained, and, in fact, it must accelerate. I believe that it will.

And then, of course, with respect to affordability, I have been very concerned, once again, by just regular folks out there that want to send their kids to college. That is what our public colleges and universities are for. They are for our young people in the State to make sure they get an education. Such accessibility is very important.

Therefore, I have cut tuitions in the State, through the legislature this past session, 20 percent across the board. The colleges, however, are not suffering a 20 percent loss of revenue. We are taking our money at the State level and committing it to higher education, so they made up that 20 percent. But, in the meanwhile, the parents and the young people or students are going to benefit from that 20 percent cut, and that will attract more and more people to the schools.

Why is that? It is important to do because it is going to help our work force, and particularly people in sophisticated engineering and technology areas, which are so important to Virginia today.

And in addition to that, in K through 12, we have wonderful standards of learning. I just was able, also, to get through our general assembly an aid to localities by taking our lottery money and returning it back to the localities in its entirety for education.

So education is a top priority for us in Virginia. Our work force, through our community colleges and through all these programs, is going to, I believe, fuel the sophisticated technology economy we have. What result? Greater revenues, greater opportunities for quality of life. And then when the time comes to set priorities, I believe tax cuts are just as important a priority as anything else, maybe more important other than national security, maybe more important-because it gives the opportunity to genuinely extend the quality of life back to working men and women.

Mrs. MORELLA. Tomorrow the District of Columbia Subcommittee is probably going to be marking up the bill that Mr. Davis has introduced, and I am a co-sponsor, dealing with tuition benefits in other schools, in State schools, that would be paid for by the District of Columbia. I am just curious about your reaction to that.

Governor GILMORE. Is this a bill to extend some tuition benefits to young people within the District for District of Columbia

Mrs. MORELLA. Right. They would then pay the in-state tuition.

Governor GILMORE. I think it would mirror the high priority that we place in Virginia on public education and making sure young people have accessibility to it. It would mirror the 20 percent tuition cut that we have done in Virginia. It is just a different format. And I would encourage it.

Mrs. MORELLA. Thank you. Thank you again for appearing before us. We look forward to continuing to work with you. Thank you.

Governor GILMORE. Thank you, Congresswoman Morella.
Mr. BURTON. Mr. Davis.

Governor, let me ask a question. I was also surprised when I heard the President talk about tax cuts being selfish. He almost repeated the same thing this year up in Buffalo, NY, where he said we have a surplus and we could give it to the people and let them—“let you spend, and hope you spend it the right way.” And that is why he likes the targeted tax cuts, which means that if you spend the money the way the government wants you to, they will give you a tax cut, but if you use your—if your view of your priorities is different from the ones government has for you, you don't get it. That would kind of be the prevailing philosophy.

But I wonder if you could talk to us about what this means to businesses, being competitive in the State of Virginia, as they get money back, and what it means to individual families in terms of being attracted to an area, and how that helps an economy grow.

Governor GILMORE. First of all, I am prompted by your question to respond directly to you: Once again, the great value that we are trying to achieve here is the freedom of people. Virginians think about this very much. It is the freedom of people, the enabling of people. What business is it of ours how they spend their money? It isn't our business. It is their money. They should contribute it to the National Government to the extent that it is necessary in order to carry out the essential parts of government that are necessary for all of us, but, beyond that, this is precious revenue which is necessary for them to be free people. If you tax everything that everybody has, then they are not free anymore; they have to decide how they are going to live based upon how the government makes those definitions, just as you point out, Congressman Davis.

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So this is about liberating and freeing people. It is a great philosophical goal and objective that we have. And you may think, gee, we would never tax at all the way that they did in the Soviet Union or something like that, but we are taking 32 percent-32 percent. We just manage to do it in a way that people don't always notice. And we are living in wonderful times, so that people can increase their revenues in a way where they just don't notice how much money they are spending. But the question really to ask is: What more could they do for their children? What better home could they buy? Could they have an improved quality of life? So it is really about the freedom of people.

The second part of your question was a practical one with respect to the attraction of business. It is true that we have in our State a pro-tax cut and pro-business philosophy, not because we think that it is better to help the rich or anything like that. It is because we believe that it is the ability to provide more and better quality jobs for people, so that individuals can be working successfully and self-actualizing through their careers.

We are doing that, particularly in your community, Congressman Davis, in northern Virginia fairly well. We are bringing in more jobs every day, more sophisticated work, and it is, in fact, the income tax which is driving the revenues of Virginia, and driving it very well. But we are in a position now to continue to in a measured way return money back to businesses and to the people of Virginia.

A couple of technical matters: We did some additional reforms this year that I am very proud of. We are increasing Enterprise Zones, which gives tax breaks to people in specific areas, particularly places where we need to employ people.

We just did an exemption on the sales tax on Internet equipment, communications equipment, which makes us one of the most attractive States in America for the development and establishment of Internet companies. And these are just a couple of examples.

We believe we can do this, and the result is going to be better jobs. I think the proof is in the record. We are doing, I think, very aggressive development work in Virginia. As a result, the revenues are phenomenal really.

Mr. DAVIS OF VIRGINIA. So you believe there is a tie between increased business activity, which produces more revenues, and allowing those businesses to keep more of what they earn?

Governor GILMORE. Yes, indeed, because it is capital that they have that they don't have to then borrow. But the goal, again, is not to enrichen the companies. The goal is to create jobs and greater opportunities and economic opportunity, which is to the benefit of the people.


If we were to hit a recession right now, a shorter period—I know you were careful in putting the tax cut together originally to say this was going to be dependent on economic growth; that you

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