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.
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.
This is why Governor Glenn Youngkin originally proposed a 12% across-the-board income tax cut for all Virginia residents, bringing the state’s top income tax rate down to 5.1%. That figure is nearly identical to the nation’s average and much lower than the current top rate of 5.75%. 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.
Lawmakers in Richmond should work to kill these unnecessary and damaging tax hikes, especially with price inflation starting to tick up again. Families deserve to keep more of their income, not be subjected to a slew of taxes on basic items.