Virginia Lawmakers: Give Fair Share a Fair Shot

Whether you have $5 or $5 million, we all want to live in thriving communities where the basics are within reach — nearby health care, quality public schools, and a safe place to live. But that’s getting harder for many families, and part of the reason is simple: when the tax code asks less of those at the top, communities have fewer resources and families end up paying more in other ways. 

Virginia lawmakers are debating several proposals this session that would ask millionaires and high-income people to pay their fair share and establish new tax brackets on annual taxable income ranging from over $600,000 to over $1,000,000. New fiscal data estimates that these proposals could raise substantial new revenues – a new 10% rate on taxable incomes over $1 million would raise over $5 billion in the upcoming two-year budget. Lawmakers should breathe life into the budget by adopting a fair share tax that could enable transformative investments in our communities.

How do Fair Share Taxes Work?

Virginia’s income tax brackets haven’t changed since 1990 and the final bracket with a rate of 5.75% only kicks in on taxable income over $17,000. So whether you are a teacher making the average state salary of $66,327, or a millionaire, you pay the same top tax rate on some of your income. Fair share taxes simply add a new income tax bracket. Say you make $1,000,001 in one year in taxable income (lucky you — that’s 15 times the average teacher pay in Virginia!). Under one of the fair share proposals that kicks in at a million, instead of paying 5.75% on that extra dollar, you’d pay 10% — just about 4 cents more. 

That’s also dollars of annual taxable income – not assets. If you have a million-dollar house or a million dollars in retirement savings, you wouldn’t necessarily see a tax increase because of those assets. You would have to be making over $1 million in taxable income in a year to even begin to see a higher tax rate. Estimates from the Institute on Taxation and Economic Policy (ITEP) show this would be paid by very few tax filers. Just about 0.34% are anticipated to see a tax increase under this proposal. So out of you and about 300 of your Virginia friends, just one of you is likely to pay a Fair Share tax.

How Does a Fair Share Tax Impact Affordability?

A fair share tax is an affordability policy. Because lawmakers have hesitated to fix our unfair and out-of-date income tax brackets, our ability to invest has been limited. When essential services are underfunded, families pay the price — often at the worst possible moment and at a higher cost.

When the state has enough revenue to fully fund the basics — health care, schools, housing — families notice it in their budgets. It means going to a regular doctor’s appointment instead of a $2,000 emergency room visit. It means the school can provide adequate support, rather than parents having to pay for tutoring. It means getting help to keep a roof overhead before late fees and court costs pile up. Even reliable transit can leave a little more room for groceries at the end of the week.

By asking the wealthiest people to pay their fair share, Virginia can fund critical services up front so families aren’t forced to manage significant, unpredictable expenses later.

Fair Share Bills and Budget Amendments

Fair share taxes are more popular than ever before. While legislation was introduced in previous sessions to establish a fair share tax, there is a record number of proposals this year. Three bills in the House (HB88, HB979, HB1074) and two budget amendments in the Senate (4-14 #1s, 4-14 #6s) propose a version of a fair share tax. In one of the House bills, as well as in both the Senate budget amendments, the fair share tax is a standalone measure. The other two House bills include fair share taxes alongside other tax changes. All that said, each proposal would be expected to generate significant new revenues.

Revenue to Meet the Moment

At a time when families are stretched thin in trying to afford day-to-day life, lawmakers need to make transformative, bold investments. Faced with limited ongoing revenues, lawmakers should create a fair share tax, which would make our tax code more fair and raise new and lasting resources to fund thriving communities.

Category:
Budget & Revenue