The legacy that Glenn Youngkin wants people to associate with his term as governor is cutting income taxes, although he is also proposing a new tax on digital goods.
Wednesday morning, he outlined his budget proposal to members of the General Assembly money committees. Youngkin prefaced his presentation by noting that other peer states have been cutting taxes and attracting population. He said changes are necessary to reduce Virginia's cost of living, attract jobs and slow population losses to other states. "The economic backdrop to the budget requires caution," Youngkin said as he noted that forecasts for state revenue are relatively flat in the next two fiscal years.
"We're cutting income taxes 12% across the board. Yes, 12 percent across the board," Youngkin told legislators as some in the audience applauded.
His proposal would cut the top tax bracket from 5.75% to 5.1%. All other brackets would also be reduced and lower-income filers would get an enhanced earned income tax credit.
The reductions would be offset by an increase in the state sales tax and by closing the "tech tax loophole" by taxing digital goods like downloads of Microsoft Word or your subscription to Spotify and Netflix.
Click here to read the full budget proposal
Another goal that Youngkin pitched to members of the General Assembly but was not directly addressed in the budget document is eliminating the car tax. "The car tax belongs in the trash can, not in your mailbox," Youngkin said.
That's probably easier said than done. Jim Gilmore campaigned on eliminating the car tax when he ran for governor 1997 and yet it's still around, particularly at the local level. Youngkin said local governments could raise their sales taxes to account for the missing revenue, a move that would require separate legislative authorization outside the budget.
In order to get his budget passed, Youngkin will have to work with a General Assembly controlled by Democrats. "Finalizing the Unleashing Opportunity Budget will require collaboration and teamwork, and it'll be a sprint," he told legislators. "I would ask us to commit ourselves to delivering a budget on time when you adjourn sine die in March."
The last time lawmakers adjourned a regular session, they left town without approving budget amendments. The financial situation wasn't resolved until two months into the current fiscal year.
Democrats express concerns
After hearing Youngkin's presentation, Virginia Democrats were quick to express some concerns.
“The only thing that kept running through my mind was ‘robbing poor Peter to pay rich Paul,’” said Stafford County-area Delegate-elect Joshua Cole. He and other Democrats are looking at the biennial budget proposal with cautious eyes.
Among Cole’s concerns is a possible increase in the sales tax, something he said would impact working class Virginians the most. Youngkin said he’d offset the increase by reducing the state’s income tax by 12% across the board.
And while rumors of overhauling Virginia’s tax code pop up every year, following Governor Glenn Youngkin’s budget proposal Wednesday morning, they’re back for 2024.
Youngkin promised to modernize the tax code with his new quote "unleashing opportunity budget," but Northern Virginia Delegate Mark Sickles, who's been on the state’s budgeting committee for years, was less enthusiastic.
“I didn’t see anything today that said ‘we gotta do that.’ I think it’ll be very difficult to pass any of these tax provisions, but we’ll see,” the delegate said.
But Sickles was surprised by the Republican governor’s proposal of a “big tech” tax which the governor said would add sales tax on digital services that the state wasn’t currently collecting. But Sickles and other elected officials said the state had become a tech hub because of its tech-friendly tax structure.
“We don’t want to kill the goose that laid the golden egg up in Northern Virginia. We dominate the tech and data center industry, we gotta see how these new taxes affect that business,” he said.
Chesapeake-area Delegate Cliff Hayes, who said he’s worked in the tech space for 30 years, pointed to a data Youngkin’s office presented which showed Virginia would be among the few states collecting some of these taxes.
“Is that going to incentivize the very talent we need if these companies are being taxed and they’re unable to pay the salaries for more workers as they say they need,” Hayes told Radio IQ.
Another repeated concern from Democrats was Youngkin’s proposals for education spending. The governor pitched a one-percent increase in teacher pay, as well as hundreds of millions of dollars in additional funding. But Richmond-area Senator Lamont Bagby wasn’t convinced.
“We need to make sure we’re being sincere about education and what the governor put in the budget isn’t enough,” Bagby said.
Wednesday’s announcement was the first step in the biennial budgeting process which will play out during the 2024 legislative session which starts January 10th.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
