- The Washington Times - Friday, December 26, 2003

RICHMOND — One of the biggest problems Gov. Mark Warner has with the state’s tax code is that the income tax demands proportionately more from the poor than it does the wealthy, particularly affluent retirees.

Now, the changes he proposes to the state’s personal income tax, by far the top source of general-fund revenue, are intended to extract more from the wealthiest Virginians and reduce the burden on poor and middle-income households.

It’s the sweet sauce that the Democrat governor hopes will make a proposed increase in the state sales tax from 4.5 percent to 5.5 percent more palatable to a Republican-controlled legislature and the constituents who elect them.

In aggregate, the changes would reduce state income-tax receipts by about $107 million for the fiscal year that begins in July 2005, the first full year the changes would be in effect. It’s intended to help soothe the sting of the proposed increase in the sales tax.

Mr. Warner’s income-tax proposals would raise exemptions and standard deductions for individuals and couples, boost the limit for paying the lowest tax rate from $7,000 to $20,000 while they end some substantial breaks for the affluent elderly and boost the top tax rate for the wealthiest taxpayers from 5.7 percent to 6.25 percent.

The income-tax increase has its defenders, even among wealthy seniors, one of the few groups that the governor concedes will pay more overall if his plan becomes law. AARP, the dominant lobby for retirement-age people, has endorsed the plan.

David S. North, 74, of Arlington, a self-described affluent senior, acknowledges that he is a rarity among people in his age and income group. He said it’s ridiculous that he and his wife paid only $70 in taxes on 2002 adjusted gross income of about $115,000.

“What he’s doing is a step in the right direction, but I wish it were a stronger step. But then, most seniors don’t have the income I do,” he said.

“The affluent elderly in Virginia have been essentially spoiled by this double whammy of no income tax on Social Security benefits and a $12,000 deduction for those 65 and older,” Mr. North said.

Social Security benefits remain untaxed under Mr. Warner’s plan, and people who already receive the generous age deductions would not lose them. People who have yet to reach 62 and 65 — milestone birthdays under Virginia tax law — would see the benefits reduced.

Those who are already 65 if the proposal becomes law will retain their $12,000 deduction. Likewise, seniors already 62 to 64 would retain their $6,000 deductions.

People who turn 65 after the changes take effect would see the age deduction phased out if their incomes exceed $74,000, and the deduction would be cut by $1 for every $2 of taxable income greater than $50,000.

The age deduction for couples would be phased out at $123,000 or more, and it would be reduced by $1 for every $2 for joint incomes of $75,000 or more.

Those who turn 62 after the plan takes effect would lose their age deduction altogether.


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