Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 6, 1992 TAG: 9201060214
SECTION: EDITORIAL PAGE: A6 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
TAX TALK AND THE MONEY FAMILY
CONTRADICTING other studies, Money magazine says Virginia is a high-tax state. Only 11 other states and the District of Columbia, says the magazine in its January issue, impose a higher combination of state and local taxes than the Old Dominion.The hitch? The magazine's rankings are based on what a typical Money subscriber would pay. Other surveys showing Virginia to be a relatively low-tax state, including reports of the U.S. Census Bureau, try to measure the relative burden on all taxpayers.
In short, different things are being gauged. According to the magazine, its typical subscriber is a two-income family of four with a 1991 income of about $74,000. But taxpayers don't always come in sets of four to the family. For that matter, taxpayers aren't always people.
In 1988, according to the U.S. Commerce Department, per-capita personal income in Virginia was $17,675. Multiply that by four, add a few dollars for inflation, and the Money family's per-capita income is at the Virginia average.
But a single, widowed or divorced person getting by in 1988 on $17,675 was also right at the state average. So was a retired couple, their children grown, with a combined '88 income of $35,350. In both cases, due to provisions of the Virginia income-tax code, their taxes were apt to be lower relative to other states than the Money family's.
Also masked by the Money survey are tax preferences enjoyed by federal retirees. These preferences, the result of a Supreme Court decision, are not unique to Virginia. But Virginia has far more federal retirees than most states, which lessens Virginia's overall tax burden - though not the Money family's.
Corporations also pay state and local taxes - and in Virginia, corporate income taxes are about half the national average when the state's per-capita personal income is taken into account. That lowers the cost of doing business in Virginia, and lowers the commonwealth's overall state and local tax burden. It does not, however, lower the Money family's tax bills.
By such means is it possible to explain how Virginia can be a low-tax state overall, but a high-tax state for some. The explanations, though, raise new questions.
Is it good to be a relatively high-tax state for upper-middle-income families of four so retirees are taxed less, or should the burden be evened?
Is it better to have a relatively low top-bracket income-tax rate (5.75 percent) that kicks in at a relatively low threshold ($17,000 taxable income), or to have a higher top rate but broader brackets?
Is it better to impose relatively low corporate taxes at the cost of higher taxes on individuals, or the other way around?
The proper answers aren't always self-evident; often, plausible arguments can be mustered eithered way. Clearly, though, tax talk shouldn't be limited to how much to tax. It also should be about how much to tax whom.