THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, December 9, 1994 TAG: 9412090033
SECTION: FRONT PAGE: A22 EDITION: FINAL
TYPE: Editorial
LENGTH: Short : 50 lines
Virginia's longtime policy of exempting its own employees' retirement checks from the state income tax while taxing federal pensioners on theirs ended in the wake of a 1989 U.S. Supreme Court ruling that this is illegal.
But the fallout has put the commonwealth through long and troublesome, often acrimonious times. Finally, those times seemed near an end: The Allen administration came up with a $351 million settlement plan that many felt was reasonable; next week the state will notify 159,000 federal retirees how much they'll get back; they must decide by Feb. 1 whether to accept what amounts to 87 percent of the taxes they paid between '85 and '88 (the legally relevant years), or about half the refund they would be owed if interest were added.
Now another high court ruling, in a Georgia case, could lead to reopened negotiation, renewed acrimony and increased fiscal strife.
Michael J. Kator, who represents some of the pensioners, was blunt: ``(The court's finding) means to give 100 percent plus interest. . . . I think it tells Virginia, `Virginia, you have to give the money back.' . . . It would be my hope they would do so and simply agree to pay full refunds.''
He added that he didn't know why federal retirees should settle for less than full dollar-for-dollar refunds.
May we suggest a couple of reasons.
First, the court has treated this as an intergovernmental inequity, but, fundamentally, the exemption was an agreement between an employer and its employees. In this context, it was neither discriminatory nor morally wrong, and federal pensioners have no stronger claim than do Virginians drawing pensions from non-governmental sources.
The commonwealth may have been unwise in the first place - the rationale was to give modest relief to underpaid workers whose pensions were low - and derelict later in failing to abandon the practice voluntarily. But this wasn't meant to penalize retired residents in other sectors. There was no malice here.
In intensely competitive America, of course, the courtroom is an overused, often bitter arena where the goal seems not to find justice but to win, to trounce.
In this prevailing national atmosphere, what we suggest may sound radical. But a deal was made in good faith. The federal pensioners can afford to be magnanimous, to let it stand. And they should. by CNB