Governor Glenn Youngkin (R) on Wednesday proposed a two-year budget that will see Virginia’s income tax rate decrease, but paired the cut with a sales tax increase that will see some parts of the commonwealth pay nearly 8 percent sales tax.
Youngkin presented his “Unleashing Opportunity Budget” before the Virginia House of Delegates by noting migration trends within the United States that show Americans moving to states with lower taxes and more jobs.
“When we started this journey, Virginia was falling behind, ” the govern said.
Youngkin explained that “Americans and Virginians [were] choosing to go” to neighboring states which “had lower taxes or had started their journey to lower taxes.” Youngkin noted that the states responsible for creating the most jobs are also receiving the largest population increase from other states. The governor said that “Virginia must compete even harder” to remain attractive to Americans workers and businesses.
Youngkin said cutting the highest state income tax in the commonwealth from 5.75 percent to 5.1 percent would save Virginians about $1.1 billion. The loss in state tax revenue will be offset by a 0.9 percent increase to Virginia’s sales tax rate from 4.3 percent to 5.2 percent, the governor explained.
If passed, the increase will mean James City County, Williamsburg, and York County will pay a 7.9 percent sales tax. At least eight other counties and 20 cities in Virginia have imposed local sales taxes that will be levied in addition to the commonwealth sales tax.
Framing the sales tax increase as a modernization of the commonwealth’s tax code, Youngkin said his budget will call for Virginia to tax digital goods, but stressed that his administration will not apply the sales tax to “traditional services,” including “barbers, lawncare services, or professional services.”
“As we come together at our administration half-time,” said Youngkin, “we must compete even harder.”
Before acknowledging Virginia “will continue” to have a “divided government,” Youngkin expressed optimism that his budget could be passed “with the full cooperation from Democrats and Republicans, House and Senate, and local and state leaders.”
Following the loss of the Virginia House of Delegates, Speaker-designee Don Scott (D-Portsmouth) and Youngkin separately predicted possible bipartisan cooperation on education, mental health, and public safety, though Democrats later announced a partisan agenda and said they would work to pass it without Republican cooperation.
Youngkin said his budget will include $150 million in additional mental health funding, and $115 million for the commonwealth’s teacher retirement fund, though the governor explained the teacher retirement funding will come from reserves gained from liquidating abandoned property.
The governor recently announced separate budget items that include $500 million to address youth mental health in Virginia’s public schools and colleges, and $448 million to continue funding early childhood care and after school programs after dwindling pandemic-era funding is depleted.
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Tom Pappert is the lead reporter for The Tennessee Star, and also reports for The Georgia Star News, The Virginia Star, and The Arizona Sun Times. Follow Tom on X/Twitter. Email tips to [email protected].
Photo “Glenn Youngkin” by Governor of Virginia. Background Photo “Virginia Capitol” by Martin Kraft. CC BY-SA 3.0.
