- The Washington Times - Monday, December 29, 2003

RICHMOND — A state Democratic senator said 10 months ago that Republican efforts to repeal Virginia’s estate tax would benefit only those born to “a rich daddy or a rich mama.”

Now much of the populist rhetoric is gone. The estate tax is only a small part of the proposed tax-code overhaul by Gov. Mark Warner, a Democrat, and not nearly as contentious as plans to increase the state cigarette and sales taxes.

However, some say the “death tax” is not a dead issue.

“We haven’t seen any studies or data on the economic impacts [of the governors plan], so we have to be careful not to cut off our nose to spite our face,” said House Majority Leader H. Morgan Griffith, Salem Republican.

Mr. Warner this spring vetoed legislation supported by Mr. Griffith and other Republicans to repeal the death tax, which is levied on estates worth at least $1 million when the owner dies.

The governor’s new proposal calls for a tax rollback for all estates valued at less than $10 million. The state would exempt estates valued at more than $10 million if they are working farms or closely held family businesses.

Supporters say the exemptions are needed, in part, to prevent farmers’ heirs from being saddled with huge debts.

If the partial repeal passes as part of Mr. Warner’s broad proposal, it would reduce tax revenues by $54.5 million annually from 2005-08. Mr. Warner said the loss would be offset by tax increases in other parts of his plan.

The state collected $136.5 million in estate taxes in fiscal 2002.

“There’s still some revenue we’ll be collecting,” Mr. Warner said. “This is the strongest equity argument for estate-tax relief.”

It is not clear whether Republicans will accept the compromise. They came just two votes short in the last Senate session of overriding Mr. Warner’s veto and eliminating the estate tax altogether.

Mr. Griffith said he was confident new legislation seeking a total repeal will be submitted during the upcoming session.

Mr. Warner’s plan “certainly covers a lot of folks who are concerned about it in my district,” Mr. Griffith said. “But it doesn’t do what has been done at the national level, and that makes Virginia unfriendly to wealthy retirees.”

A 2001 federal law gradually increases the amount of an estate excluded from taxation and gradually decreases the top tax rate on inherited estates. The House of Representatives passed legislation in June that would permanently abolish estate taxes, but the bill faces uncertain passage in the narrowly divided Senate.

Democrats in the state Senate held up the bill in the last General Assembly session, accusing Republicans of catering to only the richest Virginians.

Former Sen. Leslie Byrne, Fairfax Democrat, was the lawmaker who said the legislation would benefit only those born to “a rich daddy or a rich mama.”

But some of the bill’s opponents now say they would support Mr. Warner’s compromise as long as working farms and family-held businesses are exempted.

Sen. Creigh Deeds, Charlottesville Democrat, who represent a farm-heavy region, said the compromise could help save family farms and bring new people into farming.

But Mr. Deeds and most other Democrats do not support a full repeal.

“It will certainly rise and fall as part of the [tax-reform] package,” he said. “I think there certainly has to be room for compromise.”

Martha Moore, director of governmental relations for the Virginia Farm Bureau, said the estate tax could also create more sprawl.

She says, for example, farmers’ descendants who cannot pay the tax might carve off lots to sell to developers, destroying the rural landscape.

Some Democrats think the issue is really about the state’s continuing fiscal straits.

“It’s simply more money out of the treasury in a state that’s financially strapped,” said Sen. Richard Saslaw, Fairfax Democrat.

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