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Lawmakers in Richmond Are at Odds Over What to Do with Federal Tax Cut Money

AP Photo / Steve Helber

Usually it’s a lack of money that creates friction at the state capitol.  But now it’s an abundance of it that is causing disagreement between Republicans and Democrats in Richmond.

Those federal tax cuts Congress approved late last year are expected to add hundreds of millions of dollars in new revenue for Virginia because of the complex relationship between federal taxes and state taxes. So what happens to that money? Governor Ralph Northam and Democrats in the General Assembly want to make the earned income tax credit fully refundable, helping families that earn less than $50,000 a year. Chris Wodicka at the Commonwealth Institute.

“Due to longstanding income and wealth disparities by race, those credits lift a larger share of non-white and Hispanic populations out of poverty.”

Not so fast, say Republicans. They want to see broader tax cuts that would benefit all taxpayers — from the top to the bottom of the income scale. Jared Walczak at the Tax Foundation says state leaders need to respond to the federal tax cuts in a way that keeps Virginia competitive with North Carolina or Tennessee or even Maryland.  

“If we’re talking about tax reform, and there is an opportunity for that here, you want something that makes your state more competitive. And if you’re raising taxes on most taxpayers, even inadvertently, even by inaction, that’s not great for the state’s competitiveness.”

That debate over tax cuts — who should get them and why — is expected to dominate the next session of the General Assembly, which will happen in a campaign year when all of the members of the House and Senate will be up for election in 2019.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.

Michael Pope is an author and journalist who lives in Old Town Alexandria.