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Tax cut negotiations down to the wire as General Assembly wraps up

Person speaks into microphone
Gov. Glenn Youngkin campaigns in the run-up to the 2021 election. (Photo: Crixell Matthews/VPM News)

Gov. Glenn Youngkin was elected on a promise to give Virginians a tax break. But he’s got to get buy-in from state lawmakers before the end of the General Assembly session, which is expected to wrap up this weekend.

Last week, Youngkin made another stop on his tax relief tour; this time he was in Fredericksburg speaking to supporters at a local auto body shop called Iron Pig Offroad.

Youngkin told the crowd they’re paying too much to live in Virginia, as evidenced by a multi-billion dollar surplus.

“We have record levels of revenue coming into state government,” he said. “Why? Because we’re overtaxing virginians.”

While a VPM News analysis shows state taxes have remained relatively stable since the late ‘90s, overtaxing has been a bedrock of Youngkin’s rhetoric.

He asked residents and business owners what they plan to do with the money they’ll get back next year under his plan.

“Shop!” one woman shouted.

Others said they’d pay student loans or take a long weekend trip.

Youngkin says the typical Virginia family will get back about $1,500 in the first year of his tax plan. He wants to do this by eliminating the grocery tax, increasing the standard deduction and sending one-time payments to most individuals and families.

The Virginia House of Delegates and the Senate both have tax relief proposals that they’ll have to reconcile by the end of the week before sending the final version to Youngkin’s desk for approval. Youngkin supports the House plan, which doubles the standard deduction and gives between $300 and $600 back to tax filers in the form of rebates.

That’s less money the state has to invest in services and resources, says Ashley Kenneth. She’s the president of the Commonwealth Institute for Fiscal Analysis.

“Virginia is a high capacity, but a low effort state,” she said. “We’re a top ten state in terms of household income and capacity to invest in our families and our future, but we’re a bottom ten state in how we fund many areas of core services.”

And Kenneth says the tax breaks won’t reach the state’s lowest earners – many of whom are not eligible for rebates.

“Really the only way to give significant tax help, support to low-income families is by making the Earned Income Tax Credit fully refundable,” she said.

The tax relief Kenneth is referencing would put an average of $500 back into the hands of struggling families. The Earned Income Tax Credit is included in the Senate’s budget plan and would cost a fraction of the House’s proposal to double the standard deduction. The Senate plan also includes a $250 rebate for individuals and $500 for joint filers.

Emily Griffey is chief policy officer with Voices for Virginia’s Children. Her organization also backs the Senate’s proposal.  Like Kenneth, she sees deep tax cuts as a missed opportunity to fund services, like addressing Virginia’s growing demand for mental health treatment, especially among children.

“This is the moment,” Griffey said. “This is the time that we need to start investing in our children’s mental health system’s and making them stronger.”

Recent polls show most Virginians would rather put surplus money back into services instead of their own pockets.

The nonprofit Freedom Virginia released the results of a survey of Virginia voters this week showing 65% want to spend the extra money on education.

Back at Iron Pig in Fredericksburg, Youngkin told supporters - Virginia can do both.

“We know there’s critical investments we have to make,” he said. “We want to invest in law enforcement salaries and training. We want to invest in our schools. We want to invest in our behavioral health system that’s broken. We can do that and we can cut taxes at the same time.”

But if Youngkin wants to make those investments, he’ll have to do it with $3 billion dollars less under the House tax proposal. Right now, the decision is up to the General Assembly, which is expected to wrap up it’s work in the next few days.