Governor Glenn Youngkin today presented a tax reduction plan that provides for an across-the-board income tax rate reduction of 12%. It cuts taxes for all Virginians who pay income taxes. The plan brings the state’s top rate (paid by all Virginians who earn more than $17,000) down from 5.75% to 5.1% and reduces each of the other three lower brackets by 12 percent as well.
ATR commends Gov. Youngkin for building on the $4 billion in tax relief successfully enacted in 2022 with a comprehensive rate reduction, one that stands to benefit every taxpaying family, individual, and small business in the state. Over the next year alone, Virginians could soon see more than $2 billion in annual income tax savings if Youngkin’s budget is enacted by the state legislature.
“I congratulate Governor Youngkin for reaffirming his commitment to Virginia taxpayers in his FY 2024-25 budget proposal,” said Grover Norquist, president of Americans for Tax Reform. “It’s clear that Governor Youngkin cares deeply about the financial wellbeing of millions of Virginia families and businesses. The governor’s admirable budget proposal would allow them to keep much more of their hard-earned money on a permanent basis, providing sustained relief for many years to come.”
Virginia’s present high tax rates make it increasingly unable to compete with other states for investment, jobs and growth. Virginia looks good compared to Washington D.C., with its top income tax rate of 10.75%. It’s also better than nearby Maryland, where residents pay a 5.75% top state income tax rate, plus a maximum rate of 3.2% distributed to counties. But North Carolina has taken its rate from 7.75% down to 4.75%, and just voted to continue to reduce its single rate income tax to 2.5%. Tennessee has a zero income tax rate for all Tennesseans. West Virginia voted to phase its income tax rates down to zero. Florida’s income tax rate is already zero. And South Carolina and Georgia acted recently to bring their tax rates down, too.
Youngkin’s proposal also includes changes to the state sales tax, broadening the base while raising the rate by less than a percentage point. Taken as a whole, the package would cut taxes by hundreds of millions of dollars – possibly over a billion – on net.
Finally, the plan calls for the elimination of Virginia’s tax on automobiles. Governor Youngkin is doing what many Virginia politicians have promised to do over the years.
“I both invite and challenge my colleagues in the General Assembly to completely eliminate the hated car tax,” Gov. Youngkin said. “It belongs in your trash can, not your mail box.”
Virginia taxpayers are subject to the top income tax rate of 5.75%. That rate kicks in at just $17,000, with the second-highest rate of 5% levied on income over $5,000. By reducing each of the state’s four tax brackets by 12%, Youngkin’s budget guarantees a lower tax bill for every Virginian, every year.
Although Democrats will soon control the House of Delegates by a 1-seat margin, in addition to maintaining their 1-seat margin in the state Senate, Youngkin’s budget should command bipartisan support. Virginia families continue to struggle with record-high price inflation, with the price of groceries, gas, and other essential goods up by 20% or more in just a few years.