Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, October 22, 1993 TAG: 9310220125
SECTION: VIRGINIA PAGE: B3 EDITION: METRO
SOURCE: BONNIE V. WINSTON STAFF WRITER
DATELINE: ALEXANDRIA LENGTH: Medium
The retirees were seeking a swift refund of their taxes, while lawyers for the state tried to get Alexandria Circuit Judge Donald H. Kent to dismiss the suit without awarding a dime.
Although Kent made no ruling Thursday, the hearing could not have come at a worse time for Democratic gubernatorial candidate Mary Sue Terry, several observers said.
Terry was state attorney general in 1989 when the U.S. Supreme Court declared that it was unconstitutional for Michigan - and, consequently, Virginia - to tax the pensions of federal retirees but not those of state retirees.
Virginia had used that system for 50 years.
At the time, Terry was criticized for not being aware of the Michigan case and its potential liability for Virginia, which has the nation's largest aggregate of retired federal workers.
According to state tax department calculations, the retirees may be owed $493.7 million for taxes they illegally were forced to pay between 1985 and 1988. Of that, interest alone is about $163.9 million.
Federal retirees still are angered that Terry initiated the state's effort to block them from getting refunds. Several retirees sitting in the courtroom Thursday said the case will be a major factor in who they vote for Nov. 2.
"I'm not voting for Terry," said Frederick Bone, 75, a former IRS worker from Fairfax County. "I think Terry's wrong on this."
Terry spokesman Tom King said Terry has been consistent in her stand to be "fair to all taxpayers. . . . This should remind people that she took a stand."
In mid-June, the U.S. Supreme Court ruled that the retirees are entitled to refunds unless state law gives them an adequate avenue to challenge the taxes before paying them. It is now up to Virginia courts - in Alexandria, because that's where the suit originated - to decide whether the retirees had such an avenue.
During Thursday's hearing, Deputy Attorney General Gail Starling Marshall argued that pensioners could have challenged the tax before the state tax commissioner. She also argued that the pensioners deserve no more than $36.2 million, the amount of revenue the state lost by not collecting taxes from state retirees.
Marshall also asked that if the judge decides to award refunds, he delay the ruling until the General Assembly comes up with a plan.
"Considering that many of my claimants are now [dead], a request for a stay is outrageous," responded Michael J. Kator, lawyer for the retirees. "They are not getting any younger."
Kator argued that the state never offered an effective way for the pensioners to appeal their tax bills, and he called the $36.2 million figure a "wacky notion."
Even if the judge delays ruling on the case until after the election, said political analyst Robert Holsworth of Virginia Commonwealth University, "this hearing and rehashing of the issue does nothing to help [Terry]. It simply raises the issue again. The people who it affects most [are] a group that votes regularly."
Terry's Republican opponent, George Allen, has called for the state to settle with the pensioners and possibly use tax credits of $100 million annually for five years to refund the money. He has not specified what programs would be cut to absorb that loss of revenue.
Keywords:
POLITICS
by CNB