
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, July 25, 1994                   TAG: 9407250015
SECTION: EDITORIAL                    PAGE: A-5   EDITION: METRO 
SOURCE: By J. BRANDON BELL
DATELINE:                                 LENGTH: Medium

TAX DISPUTE

THE VIRGINIA legislature recently reconvened in Richmond to determine proper action on the Harper settlement. During three days of negotiations, several problems regarding retirees were resolved. As a result, the citizens of the commonwealth most likely will not have to repay an estimated $700-plus million in taxes collected illegally from retirees during 1985-89.

Through pressure from Gov. George Allen (as promised during his campaign), the concentrated efforts of Attorney General Jim Gilmore and the compromise of both houses in the General Assembly, a settlement was agreed upon. This settlement of $340 million, with accrued interest, will be paid out over five years, and refunds to retirees virtually all the illegal taxes they paid. This issue could have cost all Virginia taxpayers an additional $340 million if someone had not stepped in and solved the problem. This problem, which had been around for almost a decade, is finally resolved.

Yet, this package is not simply a payment due to federal and military retirees. It is a comprehensive plan to help benefit retirees and citizens age 62 and older. Since 1989, Republicans have fought to restore VRS benefits. We also have sought an end to the taxation of Social Security benefits, which is addressed in this legislation.

The Harper settlement restores VRS benefits to the after-tax level VRS members enjoyed before 1989. With this legislation, retirees who were in the work force when the 1989 change took place will see their benefits restored. Localities may, by local option, offer an additional 3 percent benefit increase to their members at their own cost. (Legislators were careful to see that they did not receive this benefit themselves. Statewide elected officials are also excluded from the benefit increase.) This VRS component imposes no new additional costs to localities.

Back in 1991, I argued with many of my colleagues that the state should not be taxing Social Security. The argument back from the Democrat-controlled legislature was that there is no tax on Social Security. Now, with the passage of this legislation, all members who voted in favor of this bill are agreeing the state should no longer be taxing Social Security.

No longer will Virginians' tax liability increase as a result of receiving Social Security. This is real tax relief, not just for federal and military retirees, but for the vast majority of Virginians 62 and older. By supporting this legislation, Democrats have conceded to the Republican argument over the taxation of Social Security.

The 1994 Virginia legislature has taken the neglected responsibility in rectifying these past mistakes. This is a fair compromise to this long and disturbing problem, a problem that is much larger than it ever should have been. After years of stonewalling on the issue while the interest accumulated, there is actually an answer and a solution that will benefit many people.

J. Brandon Bell is a Republican state senator from Roanoke County.

by CNB