Virginia’s Democratic legislators are advancing a number of their own tax proposals while killing most of Gov. Glenn Youngkin’s.
The state House of Delegates and Senate budget committees, both controlled by Democrats, forwarded bills that would change Virginia’s standard deduction, add a child tax credit, and making a portion of the earned income tax credit refundable. Meanwhile, they voted down bills backed by the Republican governor, including eliminating taxes on tips and establishing a car tax rebate program.
“With what's coming from across the Potomac now, we don't know what kind of straits we're going to be in,” said Sen. Louise Lucas (D–Portsmouth), head of the Senate Finance and Appropriations Committee. “People are talking about getting rid of the car tax and getting rid of the tax on tips. All that's popular and I agree with my constituents on it, but the rich need to pay their fair share. “
The votes come as President Donald Trump’s pause on federal grants and loans throws tens of billions of funding into question, and the priorities of Democrats in the General Assembly compete with those of Youngkin.
They also set the stage for friction between the two chambers, with the House tentatively passing more tax cuts than the Senate. The House proposals still need to clear the full chamber and then pass through the Senate — which has voted down similar bills on the earned income tax credit and child tax credit.
Commenting on the tax proposals’ failure, Youngkin focused on the car tax, which he previously called “the most hated tax in Virginia.”
“This will be an important budget issue and I look forward to working with the Senate and House to provide substantial tax relief for hardworking taxpayers,” he said Tuesday. “Senator Lucas and I both agree, we must provide substantial tax relief for Virginians. This is a wallet issue, not a partisan one.”
Youngkin’s efforts to eliminate the car tax by funding rebates for three years — and then leaving it up to state budget planners to account for afterward — was voted down and failed in both chambers.
Among the highest dollar amounts was a bill making higher standard deductions permanent and indexed to inflation, proposed by Del. Vivian Watts (D–Fairfax).
If the current standard deduction expired in January 2026, as currently scheduled, it would mean the state would collect $557 million in FY 2026, and $1.2 billion in FY2027. (Virginia’s fiscal year runs from July 1–June 30.)
Watts’ proposal would also index the standard deduction to inflation and add a higher tax bracket for those making more than $600,000 a year.
Watts’ proposal would also index the standard deduction to inflation. An earlier version of the bill added a higher tax bracket for those making more than $600,000 a year, which was later removed.
Monday a House committee voted for Watts’ proposal over one from Del. Joe McNamara (R–Roanoke County), which would have made the new, temporary deduction level permanent — in line with Youngkin’s proposed budget amendments.
“I believe we would be willing to find every effort to find the funds to support the cost of indexing that bill,” Deputy Finance Secretary Jason Powell told delegates. “We do appreciate Delegate McNamara for bringing this bill and strongly support it.”
Legislators will present their budget proposals on Sunday and then begin work on a compromise budget.
Two years ago, the last time the two chambers had to resolve budget amendment differences, the budget was finalized in September — two months after the fiscal year had started. At the time, the General Assembly was divided, with Republicans controlling the House. Now there is a new variable in that federal funding may be slashed.