by Dick Hall-Sizemore
I have taxes on my mind. It is sort of hard not to be thinking a lot about taxes these days. I just finished compiling my tax returns (yes, I realize that I am a procrastinator). The Governor is telling me that the state taxes me too much and he wants to give some of it back and lower my future taxes. Many folks on this blog also say that my state taxes are too high.
I must admit that I have not paid a great deal of attention to the details of my state tax returns in recent years. I just plugged the numbers into Turbotax and whatever return it spit out, I filed and paid what I owed or got the refund it said I was due, whichever was the case. (You have to admit; that state form produced by the electronic tax filing programs is not easy to follow without a program.)
This year, with all the talk about taxes swirling about, I decided to pay more attention to the details of Virginia’s income tax provisions. I found that they are not nearly as bad as the Governor and others make out. At least not for retirees, like me.
First the big picture. Each year, the Joint Legislative Audit and Review Commission publishes comparisons of Virginia with other states in numerous categories. First, compared to people in other states, Virginians are relatively well off. In 2021, the median personal income of its residents ranked 12th in the country. However, our tax burden is in the middle to lower half of all states. In per capita state taxes, Virginia ranks 30th; in per capita local taxes, 17th and in per capita total state and local taxes, 24th. Finally, Virginia’s state and local taxes are 8.6% of personal income, which places us 38th in the nation.
I realize that state per capita tax data does not adequately reflect the wide range of taxes paid. Lots of folks in Northern Virginia pay much more than people in Southwest Virginia, or even those of us in Richmond. However, on the other side of the coin, those people in Northern Virginia also make up most of the upper portion of the “personal income” range that goes into calculating the median. In fact, three Northern Virginia jurisdictions (Loudoun, Fairfax County, and Arlington) were in the top ten highest income jurisdictions in the country in the U.S. Census’ latest American Community Survey, with Loudoun at the top. (Probably the reason that the city of Falls Church is not included in that list is because it is limited to jurisdictions with a population of 65,000 or greater.)
From a personal perspective, for retirees, the Virginia income tax provisions do not seem Draconian at all. Right out of the gate, the Social Security payments for my wife and me were deducted from our federal adjusted gross income (FAGI). We then qualified for the “age deduction” of $12,000 each, resulting in an additional $24,000 reduction in the FAGI. Then there was the standard deduction of $9,000, personal exemptions of $3,460, and a deduction for long-term care insurance premiums. In the end, my state income tax bill came to less than $2,000. I can’t complain.