Continuing his “Thank You, Virginia” tour, Governor Ralph Northam announced that his upcoming budget proposal will include tax cuts and refunds, including some similar to those Governor-elect Glenn Youngkin has called on Northam to include in his budget.
“When Virginia cuts taxes next year, it should be done in a way that benefits working people,” Northam said in a Tuesday press release. “Many professionals made it through the pandemic fine, as their work simply moved online. But workers haven’t been so lucky when their jobs require close contact with other people. Some jobs simply can’t move online—restaurant workers, early childhood educators, home care attendants, and others—and we all depend on the people who do this work. Virginia can help working people by eliminating the state grocery tax, providing one-time rebates, and giving a tax break to people who are working.”
Northam’s announcement highlights Virginia’s strong financial condition and the Commonwealth’s record-breaking surplus.
“Virginia is able to take these steps now because our sound fiscal leadership has shaped a booming economy,” Secretary of Finance Joe Flores said in the release. “These steps are tools to make sure that working people share in the prosperity.”
Northam’s proposal includes eliminating Virginia’s 1.5 percent grocery tax, leaving local revenues intact. A total 2.5 percent sales tax is levied on groceries in Virginia. That includes a state sales and use rate of 1.5 percent, and a local sales and use tax of one percent.
The proposal also includes making up to 15 percent of the federal Earned Income Tax Credit (EITC) refundable for eligible low- and middle- class families, an echo of an earlier Northam proposal. In 2018, Republicans said the earlier proposal would burden the middle class, according to WRIC.
Northam’s Tuesday proposal includes one-time tax rebates of $250 for individuals and $500 for married couples, and ending accelerated sales tax payments for retailers — where retailers pre-pay sales tax to Virginia before collecting it in sales.
If enacted, the changes in Northam’s announcement will reduce state revenue $2.1 billion in a mostly one-time reduction, although $419 million of that will be an ongoing reduction.
Delegate Joe McNamara (R-Roanoke) is an accountant and small business owner. Speaking broadly, he told The Virginia Star, “I think the [Northam] tax proposals represent a great benefit to Virginia tax payers and I’m thrilled that he’s started to enact part of Governor-elect Glenn Youngkin’s tax policies.”
Northam’s press release highlights his own call to eliminate the grocery tax during his 2017 campaign, but Republicans highlighted the contrast between Northam’s enacted policy and his Tuesday tax cut announcement.
“Now we know what it takes to get Virginia Democrats to propose cutting taxes — losing to a Republican,” House of Delegates Speaker-designee Todd Gilbert (R-Shenandoah) said in a statement.
Republican Tax Policy
In his Day One Game Plan announcement in August, Youngkin called for eliminating the grocery tax. His campaign confirmed Tuesday that means the total 2.5 percent tax with both the state and local components.
His plan also includes a one-year suspension of the gas tax increase, doubling the standard income tax deduction, and lowering taxes on veteran retirement pay. It also includes a $300 one-time tax refund for individuals and a $600 one-time refund for joint filers.
He reiterated those commitments at the Virginia Chamber of Commerce Economic Summit on December 3.
Youngkin said, “Now based on many, many discussions, these are becoming bipartisan issues. And so I strongly encourage Governor Northam to include these provisions in his outgoing budget that he will introduce in two weeks.”
He has also promised to veto any tax increases.
Many of Northam’s announcements from the past week have highlighted pieces of his budget proposal that are similar to Youngkin’s campaign messaging.
In a Tuesday statement, transition aide Macaulay Porter said, “Governor Northam’s budget proposal is a step in the right direction but does not entirely fulfill Virginians’ mandate. We appreciate the Northam administration laying the foundation for these elements of the Day One game plan so that Governor-Elect Youngkin can hit the ground running on January 15th to begin executing on his key campaign promises and finish the job.”
McNamara is introducing several tax reform bills for the 2022 General Assembly session, including a bill to double the standard deduction and a bill to eliminate the full 2.5 percent grocery tax. McNamara’s bill would also keep localities whole so they don’t lose the funds that would come from the one percent local tax or an additional one percent of funds based on school-age population that comes back to localities from the state’s share of the tax.
He said he’s thrilled with the first steps of the Youngkin tax plan, and he expects the next few years to be good for investment, business, and individuals.
“I think you’re going to see the next administration have a great deal of respect for your income that you’ve worked hard for,” McNamara said. “I think you’re going to see the next administration look for ongoing tax reductions across all income sectors as well as commercial.”
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Eric Burk is a reporter at The Virginia Star and The Star News Network. Email tips to [email protected].
Photo “Ralph Northam” by Ralph Northam. Photo “Glenn Youngkin” by Glenn Youngkin. Background Photo “Virginia Capitol” by Martin Kraft. CC BY-SA 3.0.