VIRGINIA, USA — The Virginia General Assembly heads back to session on Jan. 10, where Democrats and Republicans will tackle Governor Glenn Youngkin's proposed budget which includes massive changes to the state's income and sales tax.
Items on the table include potentially cutting state income taxes by 12% "across the board." To offset these cuts, Youngkin is proposing a 0.9% increase in the sales tax from 4.3% to 5.2%.
However, some economists are already sounding the alarm, saying the change could disproportionally impact lower-income families.
"Somebody making 25,000 is going to be paying the same tax rate as a guy making 250,000," said Peter Shaw, a TCC Professor Emeritus of Business Administration.
Shaw agreed the proposed tax rate is flat across the board, but the government will then be able to take a bigger percentage when it comes to families shopping at the grocery store.
Under the proposed budget, a person making $50,000 a year, would save roughly $325 in their income tax by the end of the year.
However, these savings could immediately go back towards local and state governments as the sales tax will be higher at locations such as grocery stores, department stores, and restaurants.
"About 50% of my increase in take-home pay is going to go to sales tax in this example," said Shaw.
The sales tax would also be extended to include digital services like streaming videos, Ebooks and downloaded music.
Some Democratic lawmakers criticized Youngkin's proposed tax plan, calling it "regressive" and favoring the wealthy
"By lowering taxes for the wealthiest Virginians and raising local and state sales tax, the burden is shifted onto those least able to afford it," said Don Scott, the incoming House Speaker and a Democrat who represents parts of Portsmouth.
If the proposed budget is accepted, Youngkin said the state could see a return of "millions" by 2026.
Democrats and Republicans will take up the budget bill during the 2024 Virginia General Assembly.