Virginia budget negotiators announce deal on tax rebates, new education investments

While full details of agreement still aren’t public, deal will include rebates of $200 for individuals and $400 for families

By: - August 25, 2023 1:45 pm

Virginia’s state flag flies in Richmond. (Ned Oliver/ Virginia Mercury)

Virginia budget negotiators announced Friday they have reached a deal on amendments to the state’s two-year budget, signaling an end to a months-long process that has delayed numerous state investments.

“The deal is one that provides Virginians with additional tax relief and unprecedented investments in education, natural resources, and behavioral health,” said the Aug. 25 release from Sen. Janet Howell, D-Fairfax, Sen. George Barker, D-Fairfax, and Del. Barry Knight, R-Virginia Beach. “It is a win-win for the citizens of Virginia.” 

Virginia budget negotiators say deal likely by end of week

While the negotiators said they are still “completing the final touches” on the agreement, they said the final version will include a one-time tax rebate of $200 for individuals and $400 for families and increase the standard deduction to $8,500 for individuals and $17,000 for joint filers. It will also reinstate the state sales tax holiday, which lawmakers allowed to lapse, and remove the age requirement for the military retiree subtraction. 

Firm numbers weren’t provided for spending on state services, but Friday’s release noted the final budget will prioritize educational investments and provide additional operating support and financial aid to colleges and universities “to ensure access is not limited due to family income.” 

“We were able to negotiate these investments while maintaining an eye on Virginia’s continued budgetary integrity,” Howell, Barker and Knight wrote. “Virginia remains in a strong fiscal position based on these actions, which will continue to protect our triple-AAA bond rating.” 

Following a Wednesday meeting of the money committees of the Democratic-controlled Senate and Republican-controlled House, the budget negotiators said they expected to reach a deal Friday.

This year’s unusually long talks over changes to the biennial spending plan have been due to disagreements between Republicans and Democrats over how Virginia should spend its billions in surplus funds. While Republicans have pushed for longer-term tax cuts, Democrats have called for greater spending on state services like education. 

In July, negotiations appeared briefly to have broken down over a dispute about the terms of a deal Republicans said had been made in February and Democrats denied had been firmly resolved. However, talks resumed later in the summer. 

On Wednesday, Gov. Glenn Youngkin, who will have to sign the final budget deal for it to go into effect, said he was “willing to accept” a compromise that rested on one-time tax relief and signaled he intends to push for more permanent cuts in future legislative sessions. 

Both Republicans and Democrats praised Friday’s announcement of a deal.

House Speaker Todd Gilbert called the development “encouraging” and noted a special session will need to be called for both chambers to review the final agreement.

“We’re closer than ever before to providing real tax relief to Virginia families who are being squeezed by inflation and other skyrocketing costs, and providing historic levels of support for our schools,” he said in a statement. 

House Democrats characterized the deal as a “budget victory,” emphasizing the Republican-controlled House’s initial plan calling for the corporate tax rate to be cut from 6% to 5%. Knight, the lead Republican negotiator, has previously said that proposal was dropped in late February.

“The right course of action won today,” said House Minority Leader Don Scott, D-Portsmouth, in a statement. “This budget invests in our kids, not corporations, taking the commonwealth forward, and not backwards like the VA GOP are attempting to do.”


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Sarah Vogelsong
Sarah Vogelsong

Sarah is Editor-in-Chief of the Mercury and previously its environment and energy reporter. She has worked for multiple Virginia and regional publications, including Chesapeake Bay Journal, The Progress-Index and The Caroline Progress. Her reporting has won awards from groups such as the Society of Environmental Journalists and Virginia Press Association, and she is an alumna of the Columbia Energy Journalism Initiative and Metcalf Institute Science Immersion Workshop for Journalists.