A Senate Finance and Appropriations subcommittee voted unfavorably on a proposal of Gov. Glenn Youngkin’s to cut the income tax Friday.
The SFAC Resources Subcommittee voted to recommend carrying over the proposal to next year, which is a polite way of killing the bill
In December Youngkin proposed his two-year budget, which included cutting taxes by roughly 12% for all tax brackets, increasing the sales tax by 0.9%, removing sales tax exemptions for digital goods, and increasing tax credits for low-income families. The proposal would’ve amounted to roughly $1 billion tax cut in total.
“Virginia must compete and that means we need to continue to reduce the overall tax burden of hardworking Virginians and put the Commonwealth in a stronger position to compete for jobs and residents,” said Youngkin spokesperson Christian Martinez.
As VPM News reported in 2022, Youngkin’s budget proposal at the time included over $1 billion in tax cuts. Those were largely scrapped, and the final amended budget was signed months after the fiscal year began on July 1.
Democrats have said the changes in Youngkin’s “legacy budget” are regressive and would put more of the tax burden on lower-income taxpayers. The progressive think tank The Commonwealth Institute For Fiscal Analysis said lower-income families would see their total taxes paid go up.
State Sen. Richard Stuart (R–King George), who introduced the legislative version of Youngkin’s budget proposal, presented his bill Thursday to the subcommittee.
“I don't need to tell you all the significant challenges that they faced in recent past, particularly due to inflation, and it's making it very difficult for some folks,” he said.
While prices in December 2023 were slightly lower than the previous month, they were 3.7% higher than December 2022. Virginia, like the rest of the U.S., saw high inflation throughout 2022, which peaked in June 2022 in the commonwealth.
Youngkin and others have framed the changes as a modernization and necessary update to state tax code. State coffers are increasingly reliant on income taxes, which account for almost two-thirds of general fund revenues.
“We believe that benefits everybody the way this is structured, and then modestly increasing the overall sales tax rate by 0.9% percent to diversify our sources of revenues,” said Finance Secretary Stephen Cummings.
Advocates argued against it, like Emily Moore of Voices for Virginia’s Children, a group that promotes economic policies for families with children.
“We know there are smarter, less costly tax proposals that can bring meaningful relief to families, such as strengthening the refundable portion of the earned income tax credit and creating a state level child tax credit,” she said.
Youngkin’s proposals did include an increase in the nonrefundable benefits tax filers can claim from the Earned Income Tax Credit.
Democrats have introduced two bills to increase the refundable EITC that have yet to be heard in the House and State Senate.
