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January 17, 2024

Kenneth: Governor Youngkin’s tax package does little to help Southwest Virginia families most in need

This op-ed originally appeared in Cardinal News

When Governor Youngkin unveiled his legacy budget in December — the only one he will see from start to finish — he unveiled a plan that could tarnish the future of Virginia families, especially families with lower incomes. At the center of his budget is a tax package that doubles down on Virginia’s upside-down tax code, which asks those with the least to pay a larger share of their income in state and local taxes than the wealthiest people in Virginia. Reducing Virginia’s income tax rates and partially offsetting the cost by increasing Virginia’s sales tax is like a “reverse Robin Hood” — giving tax handouts to the wealthy at the expense of families with low and moderate incomes. 

The Commonwealth Institute recently analyzed data from the Institute on Taxation and Economic Policy (ITEP) focused on the governor’s core tax proposals to reduce the income tax rates, increase the sales tax, and increase the non-refundable option of the state’s Earned Income Tax Credit. Overall, families in the bottom 20% of incomes, those making below $30,000 a year, will see an average tax increase of $44 while the top 1%, those making over $763,000 a year, will see an average tax cut of over $9,640. Asking working families to pay more while the wealthiest in the state rake in thousands in benefits is a proposal that only benefits a select few.

Cutting the income tax rates benefits the wealthiest among us in particular. Take people in similar tax situations but with different incomes: a childcare worker in southwest Virginia making the average regional salary of $25,560 and a high-end lawyer making $1 million. The childcare worker would see a $25 tax cut from the proposed rate reduction, while the millionaire would see one of $6,353 — 254 times larger. And that $25 tax cut could still be canceled out by the increased sales tax on necessities like shoes, clothes, and tires.

The most disheartening part of this plan is that the income tax rate reductions come with a big price tag, slashing $3.46 billion from the two-year budget, yet the proposal does little to help our friends and neighbors who may be struggling to keep the lights on each month or put food on the table. Additionally, this tax package is part of a proposed budget that has no additional investment in affordable housing and no money to fund any of the school funding formula recommendations for public schools from the legislature’s research agency, JLARC, which recently found that Virginia’s students and schools are underfunded to the tune of $4 billion. 

Thankfully, there are better tax proposals that lawmakers can consider this legislative session that provide targeted relief to families struggling to make ends meet and raise the necessary revenues to invest in the building blocks of our communities. Delegate Price and Senator Rouse introduced legislation to further strengthen Virginia’s refundable tax credit for working families, the Earned Income Tax Credit (EITC). 

This is a significantly stronger proposal than the governor’s tax package, which makes a small investment in the non-refundable EITC option, which puts tight limits on how much of the credit a family could receive, often meaning money never reaches the pockets of families who need it most. Only 5% of the governor’s proposed EITC change would go to families making below $30,000 a year while strengthening the refundable EITC option would help families most in need. 

Delegate Tran and Senator Aird introduced a proposal to create a Commonwealth Kids Credit, which would provide a refundable $500 tax credit per child for households making up to $100,000 adjusted gross income. Improving the state’s refundable EITC and creating a Commonwealth Kids Credit could put up to $1,310 back into the pockets of a family of four with a $30,000 income, which could go toward groceries, gas in the car, and more — a stark contrast to the average tax increase they could see under the governor’s tax plan. 

Lastly, Delegate Hernandez and Senator Salim are working to fix our upside-down tax code and ensure the ultra-wealthy pay their fair share by creating a 10% state income tax bracket for annual taxable incomes over $1,000,000 and dedicating those revenues to public schools, affordable housing, and child care access. 

From Abingdon to Arlington, families have made it clear: They need help making ends meet and want strong investments in education, housing, and child care. Lawmakers should think twice about approving a tax package that drains resources from our public schools and other community priorities to pay for a tax giveaway to the wealthy and, instead, advance policies that would help us all to thrive.

Ashley Kenneth

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