Budget & Revenue

School counselors, social workers, psychologists, and nurses play essential roles in meeting the mental health needs of students, keeping all students safe, reducing the use of exclusionary discipline, and helping students achieve academic and career success.

Virginia’s tax system is upside down. People earning low or moderate wages pay a higher share of their income in state and local taxes than the very wealthiest individuals, and most corporations pay no state corporate income taxes at all.

This coming weekend is Virginia’s annual “sales tax holiday.” Although sales tax holidays are pitched as a way to help families on back-to-school shopping, this policy provides little help to families who are most struggling to afford school supplies. Like other tax breaks, the cost of the sales tax holiday has to be made up somewhere in the state budget – either in the form of lower spending or higher taxes. And this one comes with a serious price tag of about $4.6 million per year in forgone state revenue – revenue that could be used to invest in schools. 

Virginia’s tax system plays a key role in shaping economic opportunity by paying for the building blocks of thriving communities like schools, roads, and libraries. Sales taxes on consumer goods and excise taxes on specific items like gasoline or tobacco products are a significant component of our state

Tax adequacy measures whether the tax system provides enough revenue overall to build strong communities and economies where families can flourish.

The budget deal struck by state lawmakers on May 30, 2018 was rightly celebrated for extending health care coverage to hundreds of thousands of Virginians, investing in mental health services and K-12 education, and boosting reserves that had been depleted during the recession.

On June 21, the U.S. Supreme Court opened the door for states to require out-of-state online retailers and other remote sellers to collect state and local sales taxes. For Virginia, the decision could mean additional state revenue of $250 to $300 million each year, according to estimates from Secretary of Finance Aubrey Layne. The court’s ruling overturns a pair of previous rulings that were decided before the rapid growth of e-commerce and the decision has been praised by state lawmakers and small business owners. 

On May 30, the General Assembly finally reached agreement on a new budget to fund Virginia’s public services over the next two years. Significantly, the budget expands the Medicaid program to provide health care coverage for hundreds of thousands more Virginians while also making key investments in areas like early childhood education and K-12 education. 

Virginia lawmakers will face a decision at some point over how to respond to last year’s federal tax legislation and how federal changes will impact state income tax revenues. First, some context: As a share of the economy, state revenues are still not back to pre-recession levels which has led to large unmet needs in crucial areas like K-12 education, health care, and infrastructure. Deciding whether to conform to – or decouple from – federal legislation could mean the difference between hundreds of millions more in state revenues to invest in these key priorities or not. Legislators should not let this critical opportunity pass by. They should conform to the new tax law.