Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, June 19, 1993 TAG: 9306190228
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: WARREN FISKE STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium
Allen said Virginia has a "moral . . . and legal obligation" to end a four-year court battle with federal retirees and negotiate a settlement to repay taxes that were wrongly assessed.
But Terry, who was attorney general when the case arose, said that the state should continue to resist repayment in court. She accused Allen of offering to "gratuitously write a check" that may not legally be owed.
The back-to-back news conferences followed a U.S. Supreme Court ruling that 200,000 federal retirees may be entitled to retroactive refunds of state income taxes.
But the refunds can be avoided if the state can prove it had systems in place in the 1980s that would have allowed pensioners to challenge the taxes before paying them. The high court sent the case back to the Virginia Supreme Court to resolve the matter.
Although a final decision on the state's liability is unlikely until well after the Nov. 2 election, Allen pledged to make the pension case a major issue in his campaign.
He accused Terry of being "asleep at the switch" as attorney general in the late 1980s, while a similar case in Michigan was being appealed to the U.S. Supreme Court. Terry has acknowledged that she was unaware of the case before the high court ruled in 1989 that states cannot have different policies for taxing federal and state retirees.
Allen said the state had large budget surpluses at the time that could have been put in reserve to settle the case had Terry spoken out. Instead, the state spent the money.
The Republican characterized the high court ruling as a major setback to Terry, who had argued that the state acted in good faith by quickly changing its unconstitutional policy in 1989 and that it should not have to make refunds.
"You learn in your first year in law school that anytime the Supreme Court says `reversed and remanded' you have not won," Allen quipped.
Allen said a settlement with retirees would not endanger his campaign pledge not to raise taxes. But Allen offered no specific proposals for a settlement, saying he would do so after covening a panel of lawyers to study the case.
Terry accused Allen of "politicizing" the pension case. She said the Supreme Court ruling in 1989 surprised not only her, but 20 other state attorneys general as well. After the initial decision, Terry said she fulfilled her duty by contesting the refunds in court.
She described Friday's ruling as a victory because "the court did not order the state to write a check for $500 million." The decision, she added, "is an important first step that could save Virginia taxpayers hundreds of millions of dollars."
Terry said the retirees, during the 47-year history of the unconstitutional tax, failed to use several systems that were in place that would have let them avoid the levy while a court determined its legality. She said, for example, that the retirees could have requested a hearing before the state Department of Taxation or asked a court for permission not to pay the taxes while the matter was in doubt.
Terry said the case pits the interests of 200,000 federal retirees against 6.3 million other Virginians. "The question is whether one party should get a windfall at the expense of all other Virginians when the Virginia legislature was always acting in good faith," she said.
Political scientists said that Friday's ruling is a short-term plus for Allen, who has been on the defensive over reports that he and his two running mates form the most conservative Republican ticket in years.
But in the long run, analysts said Allen may not have received the silver bullet he was looking for from the high court. "Because there's an incomplete resolution to this case, it's going to make it more difficult for Allen to capitalize" on it, said Thomas R. Morris, president of Emory & Henry College.
by CNB