Legislators in Richmond spent Saturday approving a two-year budget for the state, the last step before the 2024 session ended shortly after.
The conference budget passed with bipartisan support, but not without complaints from the Republican minority.
"The road to hell is paved with good intentions and our friends on the other side of the aisle paved a few miles this session," said House Minority Leader Todd Gilbert. He said the financial map proposed by Democrats in the majority did more for environmentalists, trial lawyers and unions than Virginians who can least afford it. Top among Gilbert and the Governor’s complaints was what they called a $2 billion tax increase.
Those tax increases come from three sources, according to Virginia Republicans. The compromise budget included Youngkin’s suggested digital sales tax but without the governor’s exception for businesses. It would add the state’s 5% sales tax on digital streaming services - like Netflix - but also when you buy a digital good, like a video game on Steam or the PlayStation Network. And with no carve out for businesses, it’ll tack a similar tax on application services bought by businesses in the Commonwealth while adding over $1 billion to the state’s coffers.
Steve Haner is with the conservative Thomas Jefferson Institute. He said the new tax will be among sticking points for consumers as well as Youngkin. He said the tax would make “all Virginia companies over 5% percent less competitive.”
Then there’s legislation for the creation of a new state-run Paid Family Medical Leave program.
Ashley Kenneth, CEO The Commonwealth Institute for Fiscal Analysis echoed Democrats support for the program: “More people can take care of themselves or a loved one without facing financial instability.”
But Haner said payroll taxes are often the first workers see because they’re itemized on their paychecks: “People will see it on their deductions, and it’ll irritate them.”
It’s also a likely contender for a veto considering Youngkin’s early stress on reducing costs for consumers.
There’s also budget language to force the state to rejoin the Regional Greenhouse Gas Initiative. It was adding about $5 a month to Virginia’s energy bills but had returned over $800 million to the state to support green energy and sustainability projects.
Youngkin warned it would add $600 million in “new taxes,” and Haner echoed his concerns, calling it a carbon tax paid by the public: “It didn’t come back to us, we’re paying it ourselves.”
Other notable budget increases include about $80 million to increase state employee’s wages to $15 an hour. Democrats also have legislation to move the entire state to $15/hour by 2026, but Gilbert called it an “artificial wage increase.”
“You decrease opportunity and make it hard for people to make a living,” Gilbert warned.
But Kenneth said the over state employees who’d get a raise from the budget effort “weren’t making enough.”
There are also increases for teachers and state employees more broadly, 3% a year over the two years. That comes with a nearly $1 billion tax hit and dwarfs Youngkin’s suggested increase of 1% for the same parties with a price tag closer to $235 million.
Democratic Delegate Marcus Simon spent time on the floor Saturday ahead of the budget’s passage defending the effort.
“I would say we’ve used our time wisely, got everything we needed to accomplish, we accomplished and on time and we’ve got nothing to apologize for,” the Fairfax-area Delegate said, noting it had been three years since a budget was sent to the governor before a legislative session ended.
But long-time Republican Delegate Lee Ware worried via a series of questions on the House floor that the increases in taxes, especially the addition of digital taxes on businesses, was a major departure for the commonwealth.
“Most states do this. It's not new, it's a way to modernize the economy,” Kenneth said, defending the effort, including the business tax which she said all so applies to a handful of states.
Kenneth also stressed the funding for public services was a significant change for a state with a history of underfunding things like education and healthcare. And while she said it still wasn’t enough in some cases, “It’s an important step towards a strong budget that invests in our communities.”
Haner, meanwhile, said the fight over spending priorities is nothing new, and with bad financial forecasts further restricting spending, this year will be no different.
“It’s the niceties and the necessities,” he said, quoting former Governor Doug Wilder during his budget debates. “That’s why we run elections, why we elect these people, and we end up with compromises that a lot of people don’t like.”
The budget passed 62-37, it’ll now go to Youngkin who will offer his own amendments and vetoes which will be reviewed during a brief session in April.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
