Virginia Is for Seniors - and How;The State, Uncle Sam and Now the GOP Just Can't Cut Their Taxes Enough
NOW VIRGINIA can truly call itself the "Old Dominion." Famous for its legions of retired federal and military pensioners, Virginia looks to be America's next Sun City. Thanks to a bill signed last summer by Gov. George Allen, his state can lay claim to the nation's most senior-friendly tax policy.</br></br>What's happening in Virginia should remind victorious Republicans that both political parties are responsible for the pandering to seniors that contributes mightily to America's fiscal crisis. It should also remind the Kerrey-Danforth "Commission on Entitlements and Tax Reform" to pay due attention to the word "tax" as they prepare their report. In recent decades, all levels of government have given tax advantages to well-off seniors while ignoring the extra burden this age bias imposes on younger generations.</br></br>Although many states, as well as the federal government, show favoritism to older people in their tax laws, Virginia's new law pushes this bias to a new extreme. The law offers no new benefits to seniors with incomes below the poverty line but gives handsome rewards to middle- and upper-income retirees. The bottom line is this: Every senior, no matter how rich, gets an extra $12,000 annual deduction on the state income tax form that young taxpayers don't - plus a total exclusion on social security income.</br></br>This means that, starting in 1996, a retired 65-year-old couple on maximum social security (projected at $13,764 per retiree) will pay no state income tax on their first $59,728 of income - regardless of how the rest of their income is derived. A 62-year-old couple will pay nothing on the first $40,622 of income. But a 30-year-old couple with one child will pay tax on income above $7,400.</br></br>To this new break, Fairfax County's seniors can also add the "empty-nester" total property tax forgiveness for middle-income seniors with incomes up to $40,000 and assets (excluding residence) of up to $150,000. Now add federal income and FICA taxes to the calculations, and look what happens in the following cases: