The Virginia State Capitol. (Ned Oliver/Virginia Mercury)
Bipartisan legislation that will give almost $1 billion back to Virginia taxpayers over the next two years is advancing.
Democrats said they supported the measures because they contains provisions that are similar to a Democratic delegate’s tax plan that never made it in front of a legislative committee.
Del. Vivian Watts, D-Fairfax, filed a bill at the beginning of session to address the impact of sweeping federal tax changes on the state. Though it never left a committee, the bill’s provisions are similar to those in a tax compromise lawmakers have agreed to.
The Senate Finance Committee approved House Bill 2529, carried by Del. Timothy D. Hugo, R-Fairfax, and the House Finance Committee passed Senate Bill 1372, carried by Senate Majority Leader Thomas K. Norment, Jr., R-James City.
“Every Virginian who pays personal income taxes will see lower taxes under our plan,” said Norment, co-chairman of the Senate Finance Committee. “This is simple, direct, and tangible tax relief. We are pleased to work so efficiently with the Speaker, Chairmen Hugo, Ware, and Jones, and our Democratic colleagues, to complete our work on this important issue so expeditiously.”
The plan unveiled today will give individual taxpayers a rebate of $110 and people filing jointly $220 in October— just before the November elections.
Next year, Virginia’s standard deduction will also increase from $3,000 to $4,500 for individuals and from $6,000 to $9,000 for joint filers. The bill would also not implement a provision of the federal Tax Cuts and Jobs Act that would cap the deduction of state and local taxes at $10,000.
The plan has bipartisan support and backing from Gov. Ralph Northam, who wanted to use new tax revenues for a number of spending priorities. And despite swirling controversy around the governor, he wasn’t forced into accepting a plan he didn’t like, said Secretary of Finance Aubrey Layne.
“We’re satisfied with this,” he said. “We would have agreed to this irregardless.”
Northam was never going to get everything he wanted. Republicans said early on they weren’t going to create a budget based on the revenue coming from the federal tax law, meaning many of Northam’s budget items wouldn’t be funded. Budget conversations have gone on independent of the tax discussion and Layne said some of Northam’s priorities did show up in the Senate budget proposal.
“Our goal was to take care of those most impacted by the Trump tax scheme and that’s exactly what we’re doing here,” said House Minority Leader Del. Eileen Filler-Corn, D-Fairfax.
Republicans are on board with the plan because it sends new tax revenue back to the taxpayers.
“The proposition for the General Assembly this year was simple. Do we spend taxpayer money or give it back?” said Del. Lee Ware, R-Powhatan, chair of the House Finance Committee. “The legislation we’re advancing today provides an unmistakable answer: We are giving it back.”
The compromise is estimated to affect four million taxpayers in the state. People making less than $50,000 a year will get 40 percent of the October payments. Married couples are estimated to receive $392 more in their tax refund over the next two years.
Lawmakers don’t make major tax policy changes often, but had to figure out what to do with extra money coming from President Donald Trump’s Tax Cuts and Jobs Act.
Most of the bills proposing tax changes on the House side ended up in the Rules Committee, which meets at the call of the Speaker of the House. The committee only advanced two tax-related bills: one from Del. Chris Jones, R-Suffolk, to conform to federal tax definitions and create a fund to hold any extra money the state got from new tax rules and one from Del. Tim Hugo, R-Fairfax, which would create new tax policy.
House Democrats had several issues with the bills moving in their chamber. They argued Republicans conflated policy and conformity, which is usually straightforward and passes easily with the required super-majority for emergency legislation. That didn’t happen this year, but conformity has been rolled into the new tax compromise bill and is expected to pass.
Watts made regular speeches on the House floor about how Republicans’ proposed policy would favor wealthy Virginians and lower-income people would feel twice the effect because federal changes disproportionately hurt them, she said.
On the other side, Republicans said it was important to ensure any revenue coming from federal changes got back to the taxpayers.
The windfall, as Northam called it, came from money that wouldn’t be refunded to taxpayers who usually itemize their state taxes and but wouldn’t do so in order to take advantage of the higher federal standard deduction. Virginia law doesn’t allow filers to itemize on the state level if they take the federal standard deduction.
But Republicans saw it as a tax increase, especially on middle-class Virginians.
“From the outset, the House and Senate have both been committed to ensuring that Virginians were not stuck paying higher taxes after changes to federal tax law took effect this year,” Hugo said in a statement.
“We have not only accomplished that, but we are also sending back nearly $1 billion in tax relief. This money will put nearly $400 back in the pockets of a middle-class family over the next two years, and that makes a real difference.”
CORRECTION: This story has been updated to correct the characterization of the compromise legislation and the elements in Democratic Del. Vivian Watt’s failed measure.
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