The Virginia Senate Finance and Appropriations Committee killed a pair of Republican proposals Wednesday that would have allowed localities to exempt groceries from local sales tax.
Last year, legislators eliminated the state version of the grocery tax. The 1% local tax on food for human consumption and essential personal hygiene products is about $275 million for all localities.
One bill brought forward by Sen. Bill DeSteph (R-Virginia Beach) and requested by the city of Virginia Beach would have cost the city between $12 million and $14 million annually.
Sen. Emmet Hanger (R-Augusta) said that not uniformly repealing the tax could have people traveling to different towns to shop for groceries. Sen. Chap Petersen (D-Fairfax) told reporters why he voted against the bill.
“At the end of the day, I'm all about reducing regressive taxes … we made a lot of progress on it last year,” said Petersen. “There may be some other things we can do this year, but to just take away what would have been about a quarter-billion dollars in potential tax revenue for our localities. … I hit pause, and I think we all did.”
SB 850 from Sen. David Sutterlein (R-Roanoke) would also have exempted food and personal hygiene products from the local sales tax and paid local governments an amount equivalent to the lost revenue as a supplemental school payment.
“It would remove one of the most regressive taxes that we have in the commonwealth, one that we all thought was so regressive that we removed part of it,” Sutterlein told the committee. Petersen also voted against Sutterlein's proposal.
That payment would increase from $263.3 million in Fiscal Year 2024 to $332.4 million in Fiscal Year 2029, according to a Department of Taxation estimate. (Virginia's fiscal year runs from July 1 to June 30.)
Rodrigo Soto, revenue campaign manager with The Commonwealth Institute for Fiscal Analysis, said local decisionmakers he spoke to about the proposals to cut the tax shared concerns.
“Some of them not only mentioned the need to have a diverse set of revenue raising authorities. … They also don't want to have to set up or increase things like personal property taxes or the car tax essentially to offset the loss that they would have,” Soto said.
Proposals to cut the grocery tax could make it in the budget still. In December, Gov. Glenn Youngkin proposed $1 billion in tax cuts in his budget amendments.
Virginia has a large budget surplus, nearly $2 billion, resulting from strong payroll tax collections and massive amounts of federal pandemic aid.
“These additional resources will not necessarily be the case in every single future year for Virginia. So, planning ahead and planning strategically is going to be very important for lawmakers,” Soto said.
Budget planners are accounting for a potential recession in the later part of this year, Secretary of Finance Stephen Cummings told the committee Wednesday.
VPM News wants to hear your responses to one question: What do you want to learn about the most during the 2023 General Assembly session?
