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House should hold the line on tax cuts

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You got to know when to hold ‘em, know when to fold ‘em,” country singer Kenny Rogers sang in his classic hit, The Gambler. In other words, playing a winning hand is just as important as cutting your losses.

Members of the House of Delegates should remember that bit of homespun wisdom when it comes to negotiating with the Virginia Senate on their competing budgets, specifically Governor Glenn Youngkin’s proposal to return $1 billion of the $3.6 billion record surplus back to taxpayers still struggling with inflation.

The differing budgets passed by the House and Senate offer a stark contrast between the two chambers. The Senate version offers no tax relief. Senate Finance and Appropriations co-chair Janet Howell, D-Reston, told fellow committee members that after agreeing to an earlier $4 billion tax relief package, “to go further at this time would be premature given the inflationary pressures our economy has been experiencing.”

But this extraordinary admission by one of the Senate’s top leaders that inflation – now at 6.4 percent – is a problem for state government failed to acknowledge that inflation is also a problem for Virginia taxpayers, whose income taxes fund 77 percent of the commonwealth’s General Fund, according to the Department of Planning and Budget.

The Senate’s refusal to even consider returning at least some of the surplus to those same taxpayers while voting to give state employees another raise is such a glaring example of a “what’s-mine-is-mine-and-what’s-yours-is-mine” mentality, it should convince even the most spineless Republicans in the House to fight for tax relief.

In contrast, the budget passed by the House of Delegates returns $466 million to individual taxpayers by lowering the top tax rate from 5.75 percent to 5.5 percent and raising the standard deduction to $9,000 for single filers and $18,000 for married couples. This is long overdue, but it is still modest tax relief. Much if not all of the gains will be negated in future years by the General Assembly’s continuing refusal to index state income taxes to inflation, which the Thomas Jefferson Institute for Public Policy has long been urging the legislature to do.

The House version would also lower the business income tax rate and give small businesses in Virginia an added 10 percent deduction – all while using the remaining $2.6 billion of the surplus for new spending. The Senate’s refusal to share less than a third of the excess funds with the same people who were overcharged is the extreme position here, which legislators will have to defend in an election year when all 40 seats in the state Senate are on the ballot.

Ironically, Howell and five other Democratic members on her committee (co-chair George Barker, D-Alexandria, Senate Majority Leader Richard Saslaw, D-Springfield, and Sens. David Marsden, D-Burke, Adam Ebbin, D-Alexandria, and Mamie Locke, D-Hampton) who voted to torpedo tax cuts are from Northern Virginia and the “urban crescent” including Hampton Roads, which for the past nine years has been experiencing the largest out-migration in the state as residents — including young adults aged 18-29 — flee the high cost of living.

During an appearance before this same committee in December, Youngkin pointed out that Virginia’s tax structure needs to be reformed because taxpayers “are voting with their feet.”

Youngkin’s high-profile anti-tax campaign has not hurt him politically. On the contrary, according to a Mason Dixon survey released earlier this month, he enjoys a 56 percent approval rating – the highest since he’s been in office.

That’s why when negotiating with their counterparts in the Senate, budget conferees on the House side hold a winning hand on tax cuts – if they don’t snatch defeat from the jaws of victory.

Barbara Hollingsworth is Visiting Fellow with the Thomas Jefferson Institute for Public Policy.  She may be reached at Barbholl3@gmail.com.


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