- The Washington Times - Monday, January 13, 2003

RICHMOND When it comes to the tax Virginia imposes posthumously on the estates of millionaires, Republicans and Democrats can't even agree on what to call it.
Republicans, in a concerted push to repeal the estate tax this year, deride it as the "death tax," a heavy-handed final government shakedown of the dearly departed.
Democrats said the repeal is Republicans' way of rewarding the wealthiest 1 percent of Virginians, an effort they ridicule as "tax relief for the uptrodden" and "standing up for the overdog."
Either way, it has shaped up as a partisan battleground in a session that will be dominated by reconciling a budget at least $1.2 billion out of balance, a somber chore that has found both parties in substantial agreement.
A repeal of the tax is inevitable because the state's tax rate is tied to the federal rate. Congress voted in 2001 to phase out the federal tax by 2010, and 32 states have followed Washington's lead.
The disagreement in Virginia is chiefly over timing.
The state tax applies to estates valued at more than $1 million, and Virginians don't feel its bite because it is treated as a dollar-for-dollar credit to the federal tax.
Critics of the repeal say it's wrong to benefit the wealthy when the state has struggled with unprecedented budget shortfall of $6 billion in the past year, necessitating sharp increases in state-supported college tuition, closing government offices and layoffs of more than 1,800 state workers.
During the past 10 years, receipts from the tax have ranged from a low of $48.8 million in 1992 to $154 million in 1999. Typically, fewer than 2,000 Virginians a year pay the levy.
During a presentation to fellow Democrats in their daily caucus meeting Friday, Delegate Albert C. Pollard Jr. told his House colleagues that how the parties frame the debate will be important.
"They're going to frame this as the repeal of the death tax. Our thing is to frame this as a bill that does nothing to help 99 percent of Virginians that enriches only the top 1 percent of Virginians," said Mr. Pollard, Lancaster Democrat.
Delegate J. Chapman Petersen, who labeled the bill a perk for the "uptrodden," outlined key Democratic objections in a letter The Washington Post published Friday.
The federal phaseout doesn't start until 2005, and there is "no reason to accelerate the process during a budget crisis," wrote Mr. Petersen, Fairfax Democrat. "There is also no reason why working Virginians should pay taxes on income while the descendants of millionaires pay no taxes on their inheritances."
Republicans, however, say that without the repeal, Virginia would lose far more than it takes in through the tax because wealthy people who create employment will simply shut down their businesses in Virginia or move to states that have no estate tax.
"The very wealthy, they're not concerned about this tax. They'll just pick up and move. They probably already have homes in Florida or someplace where they could establish their domicile. I don't think that's healthy for Virginia to have these very wealthy families moving from Virginia," said House Speaker William J. Howell, Stafford Republican.
Republicans counter that an economic downturn is precisely the time to provide tax relief and that if Virginia is among the last to repeal the tax, the wealthy would begin their exodus.
The repeal would not take effect until 2005, after the current two-year budget expires.
Gov. Mark R. Warner, himself a multimillionaire, is chilly toward the estate tax repeal but has not said he would veto it. The basis for his objections is also different.
Mr. Warner agrees that leaving the tax on the books could frighten away jobs, but he opposes the timing of the repeal, preferring to consider the estate tax as part of a comprehensive rewrite of a state tax code that both parties acknowledge is badly flawed.
"It is in pretty serious condition because the tax base has been narrowed over the past 15 to 20 years, and you have a relatively small number of people paying the bulk of the tax," said Senate Majority Leader Walter A. Stosch, Henrico Republican.
"What that does is it removes a lot of the stakeholders, so there are a lot of folks who are not concerned about raising taxes because they're not paying taxes," said Mr. Stosch, also an accountant.
A special House and Senate commission empaneled to recommend tax reform found the task too complicated to complete in 2002. There's no prospect that the job will be finished this year, when all 140 legislative seats are up for election.
Mr. Warner plans to make tax reform his top legislative focus for 2004 and said he takes legislative leaders at their word that it will be done then.
Mr. Howell and Mr. Stosch said they support reform and that it will happen soon but not as soon as the estate tax repeal.

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