
by Hans Bader
Delegate Phil Hernandez, D-Norfolk, has introduced legislation to raise state income taxes on people making over $1 million per year. Their marginal tax rate would rise from 5.75% to 10%, under HB 2333. This tax increase wonโt become law this year, but it might become law under a future Democratic governor.
Virginia already has higher income taxes than most of its neighbors, unlike a decade ago. Back in 2015, Virginia had lower income tax rates than West Virginia, North Carolina, and Kentucky. Back then, the top marginal tax rate was 6.5% in West Virginia, 6% in Kentucky, and 5.8% in North Carolina, compared to 5.75% in Virginia. And the lowest tax rate (for low-income households) was 5.8% in North Carolina, 3% in West Virginia, and 2% in Kentucky, compared to 2% in Virginia (most taxpayers pay the top marginal tax rate in each state).
But in the decade since, most of Virginiaโs neighbors have cut tax rates, while Virginia has not. Kentucky now has a maximum tax rate of 4%, North Carolina now has a maximum tax rate of 4.25%, West Virginia now has a maximum tax rate of 4.82%, while Virginia still has a maximum tax rate of 5.75%. Tennessee has no state income tax. As a result, Virginia is now one of the ten-highest taxed states.
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