Republican lawmakers proposing to eliminate Virginia's estate tax

Richmond Times-Dispatch

Despite a cash crunch that's causing deep cuts in services, Republican lawmakers - with an eye on next year's election - want to eliminate another tax.

This time, they're proposing doing away with Virginia's estate tax, branded the "death tax" by critics.

The federal estate tax is supposed to be scuttled by 2010, but legislation next month in the Republican-controlled General Assembly would accelerate the phaseout of the Virginia levy, erasing it by 2005.

In recent years, the state has generated as much as $153.3 million a year from the estate tax, according to the Virginia Department of Taxation.

Proponents say the tax should be eliminated because it penalizes the middle class, forcing the sale of family-held businesses, farms and other assets to cover climbing estate-tax bills.

"It's very easy to think of this as something for the rich," said Senate Republican Majority Leader Walter A. Stosch of Henrico. "But there have been some unintended bad consequences."

Others, however, are alarmed at the prospect of additional tax breaks when the sour economy - and the rising cost of car-tax relief - are forcing spending cuts approaching $6 billion.

"We're ranked 43rd - and falling - in community services for the mentally ill, and I think it's scary for legislators to be looking for ways to give away money," said Valerie L. Marsh, executive director of the Virginia wing of the National Alliance for the Mentally Ill. "People are getting hurt now."

Gov. Mark R. Warner, a multimillionaire investor before his election in 2001, had no immediate comment on the proposal.

"We need to look at the bill," said deputy press secretary Kevin D. Hall.

Tax commissioner Kenneth W. Thorson, however, said the legislation may be unnecessary because Virginia's estate tax tracks its federal counterpart and would end at the same time as the national levy in eight years - unless Congress decides otherwise.

"At the time there is no longer a federal estate tax, there will no longer be a Virginia estate tax," he said.

The initiative, which emerged from a legislative study of state-tax law that put off recommending sweeping revisions because of the dismal fiscal situation, should be viewed through a political filter, coming in the run-up to elections for the House of Delegates and Virginia Senate next November.

The top Senate patrons include Stosch, who formally announces for re-election tonight, and two other moderate Republicans who angered party conservatives in 2001 by opposing as too expensive the expansion of former Gov. Jim Gilmore's car-tax relief program.

Senate Republican Floor Leader Thomas K. Norment Jr. of James City County said his sponsorship is not a peace overture to conservatives or aimed at discouraging a nomination challenge.

"I don't know that it's protecting myself on the right," said Norment. He added that elimination of the estate tax would keep Virginia competitive by encouraging people to house assets here rather than moving to a state without an estate tax.

Senate Finance Committee Chairman John H. Chichester, R-Stafford, is also reportedly backing the bill. The lead House sponsor is expected to be Del. Robert F. McDonnell, R-Virginia Beach, co-chairman of the tax-reform study and an unofficial candidate for attorney general in 2005.