RICHMOND, Va. (WRIC) — Virginia House Republicans have embraced tax cuts for corporations and the state’s top income bracket, along with higher deductions for all, while Democrats pushed back and demanded more investment in schools.
Delegate Joseph McNamara (R-Roanoke), a patron of the two tax bills, HB 2319 and HB 2138, framed the cut to Virginia’s top tax rate — from 5.75% to 5.5% — as a way to stop people from moving to states with lower tax rates.
“We lost 132,000 people over the last ten years that have exited the commonwealth of Virginia, and of those 132,000 people they took $9 billion of adjusted gross income with them,” McNamara said.
McNamara was drawing his numbers from a presentation given earlier by a prominent Youngkin administration official. According to data from UVA, Virginia has consistently seen more residents moving to other states than move in since 2013, totaling a net loss of about 130,000 people to migration over the past decade.
But it’s not clear how much of a role taxes played in those decisions. For instance, two of the top destinations for Virginians moving out of state in 2019 were Florida and California — a state with no income tax and a state with one of the highest income taxes int he country, receptively.
That year, a net of 4,599 residents moved to tax-free Florida, while 7,512 moved to tax-happy California.
Meanwhile, Virginia’s population overall has continued to balloon, adding 600,000 people from 2010-2020, growing slightly faster than the country as a whole.
The bill also includes an increase in the standard tax deduction to $9,000, meaning a larger portion of Virginian’s income will go untaxed. For example, under the new proposal, someone making $30,000 in a year would pay taxes as if they made just $21,000.
A companion bill also cuts the corporate tax rate from 6% to 5% and provides expanded tax deductions for some businesses. That will mean $362 million in lost revenue from corporations over the next two years.
Democrats criticized McNamara’s plan, saying it would disproportionately benefit the state’s top earners.
“Under the bill before you, over half the taxpayers will get a maximum of $50, and less in many many cases,” said Delegate Vivian Watts (D – Fairfax). “If you’re working on minimum wage, you’ll get zero!”
But McNamara said at least 86% of Virginians would see some relief, emphasizing the state’s need to compete with places like Florida, which have eliminated the state income tax altogether.
“I would venture to say that virtually all taxpayers will benefit by more money in their pocket by these bills being pushed forward,” he said.
Delegate Jeffrey Bourne (D-Richmond) also spoke in opposition to the bill, saying it would take away much-needed funds that could be put toward public education.
“We can’t be intellectually honest with ourselves or the people we represent in saying that we have a surplus, and here’s why,” he said. “We have too many unmet needs here in Virginia. The total for this bill in particular is $900 million. We have $1 billion in unmet needs in our K-12 education system.”
“We are meeting our obligations to the Commonwealth of Virginia, now it’s time to meet our obligations to our taxpayers,” McNamara responded.
Both proposals go against the recommendations of a study commissioned by the House of delegates on tax reform, which suggested that both the top tax rate and the threshold for paying it should be raised since, currently, 47% of all Virginians pay the top rate on at least some of their income.
The proposal passed along party lines on a vote of 51-48 but it is likely to face serious opposition in the Senate, which will have to come to a compromise before the bill can be sent to Governor Glenn Youngkin.