ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, February 25, 1997 TAG: 9702250048
SECTION: EDITORIAL PAGE: A-4 EDITION: METRO
SERIES: Last of a series
MEMO: ***CORRECTION***
Published correction ran on February 27, 1997.
Clairification
As of Jan. 1 for 1997 returns on 1996 income, Virginia's Age
Deduction Tax Credit was upped to $6,000 for those aged 62 to 64 and
$12,000 for those 65 and older. An editorial Tuesday listed the
previous, lower figures. The boost in the deduction, which is not
means-tested, reinforces the point that it contributes to unfairness in
state taxes.
VIRGINIA'S personal-income tax structure should be made more progressive. Yes, that could mean a tax increase for those with higher incomes. But the rates would better reflect ability to pay.
The increased revenue, moreover, could help make up for the loss of food-tax dollars, if the sales tax on food were repealed. Or it could help fund an Earned Income Tax Credit for lower-income Virginians.
Either way, Virginia's tax system would be fairer.
As it is, the commonwealth's top personal income-tax rate - 5.75 percent - is lower than most states'. In 1993, 31 states with broad-based personal income taxes imposed higher top rates; only eight states had a top rate lower than Virginia's. Few states have changed their tax structures since 1993.
What's more, Virginia's rates are graduated only slightly: 2 percent on the first $3,000 of taxable income; 3 percent on $3,001-$5,000; 5 percent, $5001-$17,000; 5.75 percent for income greater than $17,000. That means an individual with taxable income of $500,000 or more pays the same marginal rate as someone with taxable income of $17,001.
The wealthy clearly are favored - and not just because most people end up paying the same rate.
Affluent residents, in addition, are far more likely to own expensive homes with mortgage interest that is fully deductible from both their state and federal tax bills. Their local real-estate taxes and personal-property taxes on pricier cars and boats also are deductible.
The system favors the elderly, too, especially the well-to-do. Not only does the state refrain from taxing Social Security. It gives an Age Deduction Tax Credit to all senior citizens, regardless of their income. As a deduction on state income taxes, this is worth $5,000 at age 62, $10,000 at age 65.
The wealthy, of course, still pay substantially more per person. But because the amount paid in state income taxes is fully deductible on federal tax returns, the federal government absorbs a good portion of their state-tax liability. An increase in the state's top rate on higher-income levels would not fall onerously on the rich, but it would make the structure more equitable.
So would an Earned Income Tax Credit for the working poor. And repeal of the food tax - or, at the least, a food-tax credit for lowest-income families. And repeal of the Age Deduction Tax Credit payola for wealthy seniors.
Add to these a review of numerous sales-tax exemptions that have been written into the tax code over the years; a long overdue increase in tobacco taxes; some fiddling with the Business Professional and Occupational License Tax; serious study of whether to eliminate the corporate income tax, and of how to reduce localities' reliance on property taxes - and you've got an agenda for meaningful state tax reform.
It's an agenda Virginia voters should set, and candidates should respond to, this election year.
LENGTH: Medium: 66 lines KEYWORDS: GENERAL ASSEMBLY 1997by CNB