Americans have faced rising costs under President Joe Biden's administration, though Republican governors, including Gov. Glenn Youngkin in Virginia, have looked to provide relief. While his proposed budget from last December sought to give residents $1 billion in tax cuts in his proposed budget, Virginia Senate Democrats instead want to increase taxes by $1.3 billion. Democrats in the House of Delegates are also going for a $367.5 million tax increase.
Youngkin billed his budget as "Unleashing Opportunity" and noted it would reform the "archaic tax code." As a press release explained, it "modernizes Virginia’s tax code and bolsters investments in job growth, workforce development, needed behavioral and mental health support for Virginians, safe communities, good governance measures, and ushers in the largest education budget in Virginia’s history." One would think that those might be causes both sides of the aisle could support.
The governor has also said that he's only interested in a deal that reduces taxes, as he made clear during his State of the Commonwealth speech in January.
"Virginia leading also means we tackle the cost of living to create opportunity so that Virginians can keep more of their hard-earned money, have great jobs, and stop moving away," he pointed out, also sharing an unpleasant reality. "Let me just remind you, Virginians are moving away. Families, small businesses, entrepreneurs, job creators, and young professionals, and the taxes they pay that fund our schools, our behavioral health care and other essential services, are moving away too."
"To be clear, this is a package deal, and I’m only interested in a plan that reduces taxes for Virginians," the governor also said during the address.
Democrats didn't listen, though. Late last month both chambers submitted budget proposals that actually raised taxes. Americans for Tax Reform (ATR) addressed the proposals, also calling Democrats out for their hypocrisy, with added emphasis:
Democrats in Old Dominion moved forward with sweeping new, higher sales taxes on critical products and services across the state, just weeks after criticizing those same provisions as regressive and unfair to the poor.
Streaming services, such as Netflix and Hulu, would now be subject to state sales tax under the Democrat majorities’ plan for the first time. A host of other digital services would receive similar treatment, including cloud storage – an essential for most Virginians who take photos on their cell phones. Residents can expect to pay an additional 6% or more for those services.
Business-to-business transactions will be hit hard as well, becoming subject to state sales taxes for the first time in history, making Virginia an extreme outlier among neighboring states. There is good reason why the vast majority of states do not tax such transactions: doing so leads to unnecessary complexity and permanent price hikes, as the tax is passed on to consumers. It also disincentivizes business investment and economic growth in the state.
ATR also laid out how the Democrats' proposal has affected other states, with added emphasis:
On top of all that, the new budget plan includes a brand-new payroll tax to fund paid family leave. In the states where this program has already been enacted, such taxes have typically far exceeded cost expectations, forcing rates to go up each year at the discretion of a state agency in order to fully fund the program. Moreover, payroll taxes are little more than poorly disguised income taxes, and hit the poorest Virginians the hardest, forcing them to subsidize several months of wages that are not their own.
With just a 1-seat majority in both chambers, Democrats now seek to slap new taxes on a wide-ranging slate of products and services, making it harder to live and work in Virginia at a time when many businesses and families are struggling. Collecting another $1 billion in new taxes every year is the last thing Virginians need.
That reaction also noted how Youngkin's original proposal is far different. "In contrast to Democrat leaders in the House and Senate, Governor Youngkin hoped to return some of Virginia’s surplus dollars to the pockets of hardworking taxpayers from whom those dollars came. Unfortunately, Democrats have other ideas, despite their recent outcry against near-identical tax cut offsets that they are now proposing as outright tax increases," ATR explained.
As the reaction piece from ATR spoke to, Democrats have a narrow majority in both chambers after Democrats kept control of the state Senate and took back the majority in the House of Delegates as a result of last November's elections.
Last Friday, Youngkin sent a letter to members of the relevant committees reiterating points he's already made. The budget conferees continue to reconcile the differences in the proposed budgets.
"My introduced budget continued this multi-year effort to lower the cost of living, with income tax rate reductions, protections for lower income Virginians, and modest sales and use tax broadening / increases to offset a portion of the costs. As I expressed in the State of the Commonwealth, this proposal was a package deal," Youngkin reminded. "Incorporating the tax increases without the tax decreases is not something that I could agree to. I do hope we can work in this budget and over this next year to reform our tax code to lower the cost of living."
Youngkin will also be giving remarks about "the future of the Sports and Entertainment District in Virginia" on Thursday. His remarks will be livestreamed.