Both chambers of the General Assembly voted today to approve a tax reform package that will provide nearly $1 billion in tax relief to Virginians. Speaker of the House of Delegates Kirk Cox (R-Colonial Heights) said the “legislation represents the most significant tax relief package in the Commonwealth in at least 15 years.”
After months of fiscal battles, embattled Governor Ralph Northam (D) announced last week that he would abandon his plan to pass a $1.2 billion tax hike on 600,000 middle-class taxpayers, which he used as the basis for $2.2 billion in proposed spending increases.
A September 2018 poll found that 60 percent of Virginians preferred the tax plan from House Republicans. Just 29 percent supported Northam’s plan of direct payments to low-income families who qualify for the earned income tax credit (EITC).
Therefore, Republican leaders have delivered on a key promise to return all $976 million from the federal Tax Cuts and Jobs Act (TCJA) to Virginia taxpayers.
“This legislation will put money back in the pockets of every single person who pays income taxes to the Commonwealth of Virginia,” said House Appropriations Committee Chairman Chris Jones (R-Suffolk). “From the beginning of this process, it has been our goal to prevent a tax increase on taxpayers and this legislation accomplishes that.”
Under the plan, the Commonwealth’s standard deduction would be increased by 50 percent – the first such change for individual filers since 1989 – rising from $3,000 to $4,500 for individuals, and from $6,000 to $9,000 for couples. This provision would primarily benefit lower and middle-income taxpayers as it applies across the board.
“Four million Virginians will soon be the direct beneficiaries of the most substantial tax relief plan in a generation,” said Senate President Pro Tempore Stephen Newman (R-Bedford). “This plan provides direct relief with tax rebates this year and lower taxes next year. We started this process with a commitment to give all of the revenue windfall from the federal tax law back to taxpayers.”
The plan also preserves existing state law on the deductibility of state and local taxes (SALT) instead of capping it at $10,000, thus preventing a double tax hike on homeowners.
The package provides additional tax refunds of $110 for individuals and $220 for couples in October of this year, totaling $420 million in tax relief. Over the next two years, married couples will receive an average of $392 in tax relief.
Moreover, 70 percent of all rebates will go to taxpayers making $100,000 or less.
As Republicans have reiterated that the tax relief plan will not cost the state “one penny,” it includes subtraction modifications for global intangible low-taxed income (GILTI), a deduction for 20 percent of net interest expenses, and places $189 million in a Taxpayer Relief Fund.
“Providing tax relief while maintaining our commitment to responsible, conservative budgeting was essential to securing the overwhelming bipartisan support this plan received,” said Senate Finance Committee Co-Chairman Emmett Hanger (R-Augusta). “With this plan, we can craft a budget that limits spending increases, maintains a low and sustainable rate of growth, and preserves our AAA bond rating.”
Despite providing tax relief, House Republicans were also able to secure a five percent pay raise for teachers, which will be included in the final budget.
By conforming Virginia tax law to the recently-altered federal law, Virginians will be able to file their state taxes without complications this May.
House Republican Caucus Chairman Tim Hugo (R-Clifton), the patron of H.B. 2529, said in a press release, “From the very beginning, I have been clear that the excess money from the federal tax cuts was not ours to spend and should not be used to vastly increase the size of government.”
Delegate Hugo added that the legislation will allow Virginia ” to invest in key areas of government while still saying ’no’ to a tax increase and ‘yes’ to allowing families to determine how to best spend their own money.”
The bill was approved 95-4 in the House and 35-5 in the Senate.
Senate Majority Leader Tommy Norment (R-James City), the patron of S.B. 1372, said the culmination of the tax relief package “would not have happened without a clear vision for a simple, direct plan that could earn the support of the both parties, both chambers, and the Administration. Delegates and senators, Democrats and Republicans, worked together to approve a major legislative achievement that was unforeseeable even a few weeks ago.”
The bill was approved 95-4 in the House and 38-2 in the Senate.
Both bills were approved as “emergency” legislation, meaning their provisions will become effective as soon as they are signed by Governor Northam.
Following the vote, House Finance Committee Chairman Lee Ware (R-Powhatan) noted, “Thankfully, we have made the just and prudent decision to give the money back to our taxpayers.”