Buoyed by strong state revenues, some 2.7 million taxpayers who take the state’s standard deduction are on track to get a one-time tax refund as early as September 16, state officials said at a committee meeting Monday.
But the refunds -- $110 for individuals and $220 for joint returns -- that were passed this year by the General Assembly won’t go to a handful of taxpayers whose tax liability is entirely offset by state tax credits.
Those credits include a $300 credit for individuals living below the poverty line, as well as credits targeting people who invest in historic homes, vineyards and state-approved school scholarship funds.
Del. Chris Jones (R-Suffolk), chair of the House Appropriations committee, advised his colleagues on how to answer calls from constituents who were upset about not receiving checks this fall.
“Ask them, did they take advantage of any of the tax credit programs of the Commonwealth?” Jones said. “Because if they did, they will not get a refund.”
Jones pointed blame at the Senate, which rebuffed the lower chamber’s attempts to include some of those taxpayers in the rebates.
Low-income Virginians are by far the biggest users of tax credits, with nearly 346,000 taking advantage of Virginia’s version of the Earned Income Tax Credit in the 2018 fiscal year. Those who take advantage of the credit this year, and had their tax liability eliminated by it, won’t get a separate $110 or $220 refund check -- a blow to Democratic Gov. Ralph Northam's plan at the start of the 2019 legislative session to prioritize tax rebates for the lowest earners. GOP lawmakers argued that giving that group a separate rebate was tantamount to paying them twice -- first in the form of a credit, then again in the form of a check.
But the move also excludes a much smaller number of higher income Virginians who are more likely to take advantage of the various investment-oriented credits.
Secretary of Finance Aubrey Layne said the current tax package punished taxpayers who, through the credits, supported key economic activity and programs prioritized by the state.
“They are simply taxpayers who legally chose to offset their liability with something that the state wanted them to do,” Layne said.
Taxpayers need to file by July 1 to be eligible for the refund. Individuals with errors in their return, or whose returns are flagged for fraud, may also have a delayed return or none at all. Taxpayers who owe money to state or federal agencies will see their refund checks to pay down that debt under the state’s debt setoff program.
Total state revenues as of May were up nearly 8% from the same point last year, ahead of the forecasted 3.3% increase. That means the state will have little problem gathering the $420 million needed to pay for the tax refunds. It could set aside any additional revenues beyond that into a “taxpayer relief fund” if the state determines a portion of that windfall came from President Trump’s federal tax overhaul.
Any extra money in that fund sets up the General Assembly for another tax fight in its session next year.
