Governor Northam announces tax reduction for Virginians

RICHMOND, Va. (WDBJ) - Governor Ralph Northam says he wants upcoming Virginia tax cuts to benefit people who work in the commonwealth.

“When Virginia cuts taxes next year, it should be done in a way that benefits working people,” said Governor Northam. “Many professionals made it through the pandemic fine, as their work simply moved online. But workers haven’t been so lucky when their jobs require close contact with other people. Some jobs simply can’t move online—restaurant workers, early childhood educators, home care attendants, and others—and we all depend on the people who do this work. Virginia can help working people by eliminating the state grocery tax, providing one-time rebates, and giving a tax break to people who are working.”

The governor announced Tuesday “unprecedented economic strength is enabling the Commonwealth to both invest in long-term priorities—by raising salaries for teachers and law enforcement, funding Historically Black Colleges and Universities at record levels, boosting outdoor recreation, and more—while also reducing taxes to help working people.”

Governor Northam is proposing four changes to tax policy:

· Eliminating the state sales tax on groceries. Governor Northam first proposed eliminating this tax on low-income people when he ran for Governor in 2017. The state grocery tax is 1.5%. Northam says most states do not tax groceries, and this proposal does not affect local revenues.

· Providing an income tax cut for working families. Governor Northam proposed to make up to 15 percent of the federal earned income tax credit (EITC) refundable for eligible families, which he says will give a tax break to working families. The EITC reduces the amount that low- and middle-income working people owe in taxes. Making it “refundable” means people will get a refund from the state if they are working but earning income below a certain level. The amount depends on income level, marital status, and family size.

· Offering one-time ‘economic growth rebates.’ The Governor is proposing one-time tax rebates to everyone who files state income taxes in Virginia—$250 for individuals and $500 for married couples.

· Ending ‘accelerated sales tax’ payments for retailers. When you pay sales tax at a store or online, the retailer collects it for the state, and then forwards the money along to the Commonwealth. But Northam says when the economy collapsed in 2008, the state began requiring many retailers to pre-pay these tax payments early, before they had collected the revenue. This placed a burden on retailers, Northam says, causing them to dip into their own pockets.

Together, Northam says, these plans are expected to reduce state revenues a total of $2.1 billion. Most of this amount is a one-time reduction for the state’s General Fund, and $419 million is an ongoing obligation.

The Governor said his budget proposal also will put $1.7 billion into the Revenue Stabilization Fund, set aside $1 billion for the Virginia Retirement System, and allocate $2.8 billion for capital projects in state government and higher education buildings.