Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, September 19, 1995 TAG: 9509190029
SECTION: EDITORIAL PAGE: A-4 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
Republicans Allen and Gilmore made settling the dispute a campaign issue in 1993, and put pressure on the General Assembly to cut a deal. This year, the assembly agreed to offer 75 cents for each dollar that retirees claimed they were owed. Give them credit. In doing so, it turns out, the governor and attorney general and legislators who helped negotiate the deal saved the state hundreds of millions of dollars.
Of 168,000 eligible pensioners who had paid state tax on pre-1989 federal-pension income, some 154,000 - preferring a sure thing to the litigation-dependent possibility of greater reward - accepted the state's offer. Now, the state court has ruled, the 14,000 who didn't accept the settlement are due a 100 percent refund plus interest.
With the interest meter running, the total owed them by the state could reach $90 million by the time the General Assembly next convenes in January. Add to that the $314 million owed the retirees who settled, and Virginia's liability is about $400 million. But it would be much higher - perhaps as much as $800 million - had there not been the settlement with the bulk of the retirees.
Six years ago, when Virginia's tax law applying to federal pensioners came under a cloud with a surprise U.S. Supreme Court decision in a case out of Michigan, the state's estimated liability also was $400 million. That, however, is in 1989 dollars; in after-inflation dollars the state's liability is less than it would have been if full repayment had been made immediately. Only in retrospect can one judge whether the difference is big enough to be worth the state's delaying tactics and resistance in court since then. Obviously, had the courts decided the other way, the issue would be different.
The easier call is that Allen and Gilmore, entering office a year and a half ago, saved Virginia taxpayers a hefty sum by providing the impetus for the settlement. Others - especially Allen's nemesis, House Majority Leader Dick Cranwell of Vinton - also played a significant role in negotiating the details with pensioner groups. In this partisan election year, Allen shouldn't get all the congratulations: He had help from Cranwell and other Democrats.
Meanwhile, let's not forget the larger picture. The federal pensioners were neither unfairly nor unconstitutionally taxed; however, the Virginia tax laws unwittingly violated what turned out be the U.S. Supreme Court's interpretation of a decades-old congressional statute. This whole process has been about clearing up a legal mess, not righting some great wrong.
Some federal retirees who accepted the settlement rather than hold out for full payment plus interest are now claiming they were cheated. Some are already pressuring legislative candidates for promises of future tax breaks to make up their losses. Good grief. A bidding war for more tax goodies based solely on age and retirement status is the last thing Virginia needs.
by CNB