By Steve Haner
After much political theater, the Virginia General Assembly and Governor Glenn Youngkin (R) have now compromised on a $188 billion state budget based simply on the revenue projected from current tax law, with neither tax hikes nor tax reductions. Making those revenue projections slightly more optimistic eased the path.
With both sides backing off their desire to change the tax rules, it became clear there was less controversy over how to spend the state’s money in the new biennial budget from July 2024 to June 2026. The top shared priorities of legislators in both parties include education, public employee salaries and benefits, transportation, mental health services and capital improvements. Medicaid is also a huge budget growth driver which the Assembly really does not control.
The Democrats in the majority in both chambers will celebrate that the plan achieves the spending they included in the budget they passed in March. Youngkin will celebrate that it did so without either the sales tax or carbon tax provisions that budget included. His success looks even more impressive when you recall the two other major tax hikes Democrats approved and he vetoed this year, one to impose a massive payroll tax and the other to allow localities to hike the general sales tax.
With a slight hint of sour grapes, a budget summary from the House Appropriations Committee opens with: “The adoption of the digital economy modernization was not driven by a systematic look at Virginia’s tax structure.” That is a euphemism for the expansion of the state’s sales tax to digital transactions, which just a few weeks ago was deemed by Democrats to be vital to the Commonwealth’s future.
The idea is hardly dead. One provision in this final budget, which was not included in previous versions, directs a 12-member legislative study committee to revisit the digital tax. It is also directed to review “existing sales and use tax exemptions” and evaluate “efforts to increase the progressivity of the income tax.” The goal is a tax package with some actual consensus behind it to consider in 2025. Continue reading