In a stunning twist, outgoing Virginia Governor Northam has adopted several of Glenn Youngkin’s suggestions for tax relief in his proposed budget after the Republican handily won the governorship.
Earlier this month, the Governor-Elect asked his lame duck counterpart to include tax cuts in his outgoing budget.
“Virginians were overtaxed by $2.6 billion last year. And it’s gonna be a greater amount this year, and going forward,” said Youngkin on December 3. “I strongly encourage Governor Northam to include these [tax cut] provisions in his outgoing budget.”
Two weeks later, Northam realized that his usual tax-and-spend agenda would be highly unpopular – especially as Virginia families continue to suffer under the combined burden of record-breaking inflation and the Democratic governor’s six successful tax increases.
“Now we know what it takes to get Virginia Democrats to propose cutting taxes — losing to a Republican,” said Rep. Todd Gilbert, who will serve as Speaker of the House of Delegates next year.
Indeed, tax hikes, not cuts, have been the norm since Northam took office in 2017. The outgoing governor raised the state gas tax by 5 cents per gallon last year, even as Virginians struggle to cope with soaring prices at the pump, up nearly 40% from last year. A supplemental tax on Northern Virginia added another 7.6 cent tax to the price of fuel in the region. Northam also doubled the cigarette tax, imposed a new tax on vapor products, and supported an expansion of Virginia’s sales tax to online retail transactions.
After seeing the consequences of four years of increases, Youngkin made tax cuts a central part of his successful campaign for governor. The Republican promoted a sweeping set of cuts as part of his “Day One” game plan. Northam’s budget adopts several of the Republican’s proposals, just months after Northam’s chosen successor, Terry McAuliffe, called Youngkin’s tax plan “crazy.”
Most notably, Northam calls for an elimination of the state grocery tax. However, the budget leaves in place a 1% tax on groceries for distribution to local governments. Northam is also promoting a one-time tax rebate of $250 for individuals and $500 for joint filers, as well as a 15% expansion of the earned income tax credit.
Meanwhile, Youngkin is urging the legislature go well beyond Northam’s half-hearted proposals. The Republican wants to suspend Northam’s recent gas tax hike and provide a higher rebate for taxpayers – $300 for individuals and $600 for joint filers. Youngkin also sponsors a full repeal of the 2.5% grocery tax that nixes the allocation for local governments, mandating voter approval for any local property tax increase, and slashing tax rates on veteran retirement income.
Most importantly, taxpayers would see a doubling of their standard deduction under Youngkin’s plan, raising the maximum rebate to $9,000 for individuals and $18,000 for joint filers and effectively cutting income taxes. Northam’s budget ignores this problem, preferring instead to take in billions in unnecessary additional revenue.
Though Northam’s change of heart is welcome, his budget is subject to review by the General Assembly. Lawmakers will begin debating the specifics of the now-guaranteed tax cuts on January 12, three days before Governor-Elect Youngkin is inaugurated.
Republicans now control the House of Delegates by a 2-seat margin. Democrats maintain control of the state Senate with one vote to spare, but all forty seats will be up for grabs in 2022, making the possibility of additional tax cuts far more likely.
Now that Ralph Northam has revealed his newfound support for tax cuts, state Democrats have all the reason they need to support substantial relief for Virginia families next year.