The Big Budget Debate
Some leaders in Richmond are saying the state has a big budget “surplus”, but I think that’s a stretch. Earlier this week I shared with you some needs our state has been neglecting — like overcrowded schools and understaffed hospitals. Until we cover those essentials, I find it hard to say the state is flush with cash.
But not everyone shares my view. Governor Youngkin insists “the state government has been overtaxing Virginians”, so today I want to share a run down on the tax cuts he’s proposing, the pieces I support, and the parts I think are missteps for Virginia.
When we’re talking taxes in Virginia, I think two big facts take center stage:
- Virginia is a relatively low tax state. On average, we pay less than 8% of our personal income to state and local taxes, which puts us in the bottom 15 states. (New York is the highest at 13%.)
- Virginia’s tax code is upside down. We lean hard on regressive sales taxes and a flat income tax, so the lowest earners pay the biggest share of their income, and the highest earners pay the least.
That means we have some tension in our tax code. Compared to other states, Virginia has some room to raise a little revenue to catch up on the projects we’re neglecting, and Virginia’s working families need a break.
So how can we get there?
- We can start by repealing the state grocery sales tax. Virginia is one of just 13 states that still levies this tax, and it’s time we catch up to the rest of the country.
- We can also make the Earned Income Tax Credit refundable, which would send roughly $500 back to hundreds of thousands families each year. Just six states deny families these refunds, and Virginia is one of them.
The Senate budget includes these measures, and I supported them in the House, but the Governor wants more:
- He wants to end the 1% local sales tax on groceries, too, which funds schools and transit, at a cost of $1B per year.
- Instead of targeted tax relief through the EITC, the Governor wants to double the standard deduction for everyone at a cost of $2B per year.
- He wants to gut transit funding by cutting the gas tax 5 cents a gallon for a year, but there’s no sign drivers would get relief at the pump. North Carolina has long had higher gas taxes than we do, and their gas prices are nearly the same.
These extra cuts would add up fast.
All told, I think it’s a hasty plan that turns a blind eye to persistent needs in housing, schools, and health care. That’s why Democrats and Republicans in the Senate have encouraged the Governor to slow down. He’s new to public service and could learn a little more about our obligations before he decides he has money to burn.
I hope that offers a high-level view of the stalemate that is sending the General Assembly into overtime. We can do some tax relief and make some overdue investments. We just have to get the balance right.
