With state revenues surprisingly high, Youngkin calls for more tax relief
As Virginia took in about $1.9 billion in windfall revenue last fiscal year, Governor Glenn Youngkin’s administration is proposing to invest $400 million in a new state taxpayer relief fund. .
“The right thing to do is to return unforeseen income to taxpayersRepublican Youngkin told members of the House and Senate committees that oversee Virginia’s budget process on Friday. “It’s not our money. It belongs to the hard-working taxpayers of Virginia.
But some Democratic lawmakers have said the money, much of which comes from investment taxes, would be better spent boosting civil servant salaries, providing public services and funding capital improvements such as an estimate. $25 billion in school replacement costs.
“We have to deal with these ongoing issues, and automatically saying it’s all going into tax cuts is just not realistic,” Del said. Vivian Watts, D-Fairfax, who previously chaired the House Finance Committee when Democrats controlled the House. .
Of the. Sally Hudson, D-Charlottesville, and economist at the University of Virginia, said that as corporate profits increase, “payouts to their shareholders also increase.”
“It just seems like when corporate profits are skyrocketing, you reinvest that money into infrastructure … which helps maintain a healthy business climate,” she said.
About three-quarters of unplanned income came from non-withholding taxes, a category that includes taxes on capital gains, partnerships and S corporations, IRA distributions, interest and dividends, and self-employment income. .
Tax revenues of this type tend to follow the ups and downs of the stock market.
Finance Secretary Stephen Cummings described the growth in tax revenue without withholding tax, which grew by 71% between 2019 and 2022, as “incredible”.
Corporate taxes have also seen “spectacular growth”, he noted, rising nearly 110% in the same period and 30% in the past year. However, Youngkin’s spokeswoman Macaulay Porter said they did not materially affect Virginia’s $1.9 billion in unplanned revenue because the state had in fact planned for collections in that category would be higher.
Other sources of revenue such as corporate taxes “are still much higher in dollar terms than they were in 2019, but were more or less in line with the assumptions built into the caboose budget,” he said. she said, referring to the budget that governs the last few months of the fiscal year that ended June 30, “when the non-withholding tax was way more than everyone expected.”
Data presented by Cummings also showed an increase in unwithheld payments of more than $100,000 last year. While a decade ago just under 1,200 payments for capital gains and non-wage income exceeded this threshold, more than 4,700 such payments were made last year.
“You can see dramatic growth in those who cross that $100,000 mark,” Cummings said.
Disagreement over best use of revenue
Youngkin has repeatedly emphasized his belief that windfall revenue is “not government money” and that any surplus “belongs to the taxpayers.”
Combined with about $1.2 billion that the General Assembly appropriated last year but went unspent, state revenues are currently more than $3 billion higher than expected.
But much of it has already been earmarked for special uses by lawmakers in the last budget cycle. State law requires about $900 million to be deposited into the state’s rainy day fund, Youngkin noted, while other large chunks will go to uses such as the state’s retirement fund. condition, capital improvement overruns and road widening.
The $400 million the governor wants for a taxpayer relief fund would be created “after taking into account all of the earmarked uses of that excess cash,” he said.
Any proposal must be approved by the General Assembly.
“The $400 million is a down payment,” he told reporters after his speech. “It’s the beginning of the recognition that when we actually have large cash surpluses generated by taking far too much money and overtaxing Virginians,” the government can “provide meaningful tax reductions to Virginians in the future”.
Republicans hailed the proposal as much-needed relief for Virginians suffering from record inflation.
“Across Virginia, families and small businesses continue to struggle with near-record inflation,” House Appropriations Vice Chairman Terry Austin, R-Botetourt, said in a statement. “Governor Youngkin’s revenue announcement today makes it clear that we not only have an opportunity, but an obligation, to provide even more taxpayer relief when we return to Richmond in 2023.”
But Watts said the tax relief proposal was “simply out of touch with the real world”.
Highlighting staff shortages among teachersState mental health care providers and law enforcement officers across the Commonwealth, Watts said Virginia faces “crisis gaps” in employment. And while the General Assembly recently approved salary increases of 10% and more for all these workers which took effect on July 1, “inflation is just eating away at it,” she said.
“I’m just frustrated that this awareness on the pitch hasn’t been expressed,” she said. “To say automatically, we give it back to people – well, people need kids in classrooms with trained teachers in a classroom that’s not lined because there’s a ‘vacant teacher.’
Youngkin acknowledged after his speech that “we continue to see staffing shortages”, but said he “hopes” the pay increases “will go a long way to closing a historic pay gap”.
He also signaled that the administration would seek further tax cuts, calling Virginia’s taxes high compared to neighboring states such as North Carolina and Tennessee.
“We constantly need to reduce the tax burden in Virginia,” he said.
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