Governor of Virginia Ralph Northam – December
Unprecedented Economic Strength Means Virginia Can Invest for the Future, Cut Taxes ~ Governor Proposes End State Grocery Tax, Living Up to 2017 Campaign Promise; the granting of a tax credit on labor income to workers; offering one-time discounts ~ Workers need help, although many high-income professionals have made progress during the pandemic
RICHMONDâGovernor Ralph Northam continued his’ Thank You, Virginia ‘tour today, announcing that unprecedented economic strength is enabling the Commonwealth to invest in both long-term priorities – by increasing teachers’ salaries and law enforcement, funding historically black colleges and universities at record highs, boosting outdoor recreation, and more, while cutting taxes to help workers.
The governor noted that many workers have not experienced the booming national economy which has helped many professionals and office workers advance and build wealth during the pandemic.
âWhen Virginia cuts taxes next year, it should be done in a way that benefits workers. ” Governor Northam said. “Many pProfessionals have weathered the pandemic well, as their work has simply moved online. But workers haven’t been so lucky when their jobs require close contact with other people. Some jobs just can’t be transferred online (restaurant workers, early childhood educators, home care attendants, and more) and we all depend on the people doing that work. Virginia can help workers by eliminating the state tax on groceries, offering one-time discounts, and giving tax relief to those who work.
Governor Northam is proposing four changes to tax policy:
- Elimination of the state sales tax on groceries. Governor Northam first proposed eliminating this regressive tax on low-income people when he ran for governor in 2017. Virginia’s unprecedented economic strength now makes it possible. The state tax on groceries is 1.5%. Most states do not tax groceries. This proposal does not affect local income.
- Offer an income tax reduction to working families. Governor Northam has proposed to make up to 15% of the federal Working Income Tax Credit (EITC) refundable to eligible families, which will provide tax relief to working families who need it most. The EITC reduces the amount that low- and middle-income workers owe in taxes. Making it ârefundableâ means that people will receive a refund from the state if they work but earn income below a certain level. The amount depends on income level, marital status and family size. This program was started nationally by former President Richard Nixon, a Republican. The governor proposed a similar plan in 2019.
- Offer âeconomic growth discountsâ. The governor is offering one-time tax breaks to anyone filing income taxes in Virginia – $ 250 for individuals and $ 500 for married couples – so everyone benefits from the Commonwealth’s unprecedented economic growth. Low and middle income workers will benefit the most. Virginia last offered tax refunds in 2019, offering $ 110 for individual filers and $ 220 for married couples.
- End “accelerated sales tax” payments for retailers. When you pay sales tax in a store or online, the retailer collects it for the state and then passes the money on to the Commonwealth. But when the economy collapsed in 2008, the state began requiring many retailers to prepay these tax payments.before they even collected the income. This has placed a burden on retailers, forcing them to dip into their own pockets. Governor Northam is proposing to end this system.
Together, these plans are expected to reduce government revenues by a total of $ 2.1 billion. Most of this amount is a one-time reduction for the general state fund, and $ 419 million is an ongoing obligation. All of the current tax cuts will directly benefit workers through changes to the EITC and the elimination of the state’s regressive grocery tax.
The governor said his budget proposal would also invest $ 1.7 billion in the Income Stabilization Fund, set aside $ 1 billion for the Virginia pension system and allocate $ 2.8 billion for investment projects. in state government and higher education buildings.
“Virginia is in a position to take these steps now because our strong fiscal leadership has shaped a booming economy,” said Finance Secretary Joe Flores. “These steps are tools to ensure that workers share prosperity.”
“Virginia has been named the best state for business for three years in a row and we have a remarkably strong economy, but not everyone benefits equally,” said delegate Lamont Bagby, chair of the Legislative Black Caucus. âThis tax plan focuses on Virginians who need help and who have largely not benefited from our strong economy. This is the right way to help workers and to ensure fairness in our tax policy.
The governor made the announcement at the market at 25e, a community grocery store in the East End of Richmond.
Virginia’s finances are strong
- Under Governor Northam, Virginia’s financial reserves are at record levels.
- Governor Northam leaves office with more than $ 3.8 billion in financial reserves. That’s 16.8 percent of state revenue – and more than eight times the amount Virginia had in the bank when she took office. In 2018, those same reserves stood at just $ 440 million, so he set a then ambitious goal of reaching 8% during his four-year tenure.
- This is unprecedented in the history of Virginia.
- Virginia closed fiscal 2021 – the pandemic year – with a record surplus: $ 2.6 billion.
- Unlike some other states, Virginia has weathered the pandemic without cutting services, laying off workers, or borrowing to pay bills.
- Virginia has maintained an AAA bond rating since 1938, longer than any other state.
- Virginia shares this top spot with just 13 other states.
- When rating agency Fitch reaffirmed Virginia’s AAA in July 2021, it said:
- Virginia’s âAAAâ bond rating reflects its strong fiscal resources, prudent approach to financial transactions and exceptional financial flexibility.
- The Commonwealth’s strong fundamental economic profile provides a stable income base and strong growth prospects.
- Virginia also maintains a low long-term liability burden for economic resources.
- Virginia’s fundamental economic profile remains strong, with a diverse mix of industries and high wealth. Fitch expects the Commonwealth economy to absorb the negative effects of the pandemic and return to a steady pace of growth in the near term.
- The Commonwealth’s long-term economic growth prospects are strong, with above-average population growth and high levels of education.
# # #