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Virginia’s Tax Code: An Analog System in a Digital World

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To many, testifying before a government  committee conjures visions of the drama surrounding the McCarthyWatergate, or Zuckerberg hearings.

In Virginia, not so much. Faced with processing more than 2,600 bills in 60 days, legislative hearings are often more of a kabuki dance while backstage choreographers figure out the next steps. Speakers are frequently limited to one minute and sometimes committee chairs simply ask the roomful of citizen and professional lobbyists to stand in support or opposition to a bill. Deep and incisive content, it rarely is.

But they are ideal opportunities to test the waters, grab a headline, position your bill for the future, ask a question directly of a bill’s sponsor, or determine where your adversaries are coming from.

That was surely the case at a recent meeting where House of Delegates Finance Subcommittee #3 considered a dozen bills, including Governor Glenn Youngkin’s tax reform legislation. 

Asked to testify, we rose with our 1996 vintage “Motorola personal communicator” in hand, pointing out that the outline of Virginia’s tax code had been around for decades before the phone was produced.  A quarter century later, our world and our economy has changed dramatically. The phone is unusable; the tax code survives, with band aids.

It’s for the world as it was, not for the world as it is becoming.  It’s an analog tax code in a digital world.

As we have pointed out, one result of our outdated tax structure is that in nine of the last ten years, more Virginians are leaving the state than have moved here.  Twenty-two other states have reformed their tax code by lowering tax rates, but Virginia has stayed put.  As my colleague Steve Haner notes, “Virginia need only stand still to become a higher tax state.” 

The Commonwealth’s tax code needs modernization to recognize a changing economy – not only to ensure a stable stream of revenue but to incentivize job-producing companies to relocate here and entice more taxpayers to move here. 

Without reform, Virginia faces declining future revenues from a narrowing base that will serve only to incentivize more high-income taxpayers to leave, not stay.

That is a dangerous space for any state in competition with other states.

The Finance subcommittee referred Youngkin’s bill to a special Joint Subcommittee on Tax Policy, as were all the other bills considered that afternoon. Fair enough.  Policy changes this big should be undertaken after informed study.

But based on the interactions of the subcommittee, the Left telegraphed that many see this as merely an opportunity to raise taxes, not reform them. 

Some Democratic members of the subcommittee provided a poor imitation of the Wizard of Oz (“ignore that man behind the curtain!”), hoping to ignore the loss of taxpayers leaving the state.

Despite the Census figures, Delegate Kathy Tran derided the “so-called incredible out-migration” and Delegate Shelly Simonds ridiculed the out-migration argument as “a sky is falling” claim, asserting that Virginia “lagged in international migration into Virginia.”

In truth, we are winning in international migration.  U.S. Census data demonstrates that of Virginia’s population growth of 36,000, most of it – 28,000 – came from international immigrants. In the previous reporting period, in fact, Virginia’s growth of 26,000 came only because 37,000 migrants arrived. 

Those facts underscore the Youngkin Administration’s point:  We are losing domestic migration to other states.  Ignoring facts does not make them go away.

Others suggested the phenomenon of out-migration was limited to Northern Virginia.  Yet, these are the same legislators who refer to the region as “the Bank of Northern Virginia” – an area whose wealth funds much of the state’s activity. Have they not considered that if the depositors leave in a “run on the bank” there will be less wealth to fund the state?

A bevy of legislators and social justice lobbyists tried hard to suggest that the real reason people were moving away was in search of lower tuition, more public transit and more spending on schools, and that Virginia needs to spend more on those.  They appear not to have asked the more than half million who left CaliforniaNew York, and Illinois last year — all states providing higher spending in those areas.  Perhaps residents left because their home state spent too much on those services for what they are getting, which would have resulted in … oh, right:  Higher taxes.

The most significant signals came from other legislation considered.  Delegate Elizabeth Bennett-Parker would reinstate the “death tax,” potentially crippling family-owned businesses currently exempt even from the federal estate tax. Delegate Phil Hernandez would add a new state income tax rate of 10 percent, putting Virginia in the company of California, New York, New Jersey, and four others – all of whom saw more people leaving their state than arriving.

Tellingly, the social justice lobbyists lined up to enthusiastically support Hernandez’ bill.  When Delegate Vivian Watts’ more modest proposal for a top rate of seven percent arose, the silence from the Left was deafening.

That sort of disrespect is a pity since Watts is not only Chair of the House Finance Committee but also the rare legislator who has already given substantial thought to the notion of tax reform. 

If the Youngkin reform measure is to get a serious hearing in the joint tax subcommittee to which it has been referred, it is going to need legislators who understand the need for reform, even if there is not initial agreement on the solution. 

It is going to need to hear data and analysis from folks like Dr. Bob McNab of Old Dominion University and Lee Shalk of the American Legislative Exchange Council.

And it is going to require an understanding that bills raising taxes or lowering taxes are not by themselves reform. They simply raise or lower taxes.

True reform comes when the tax code offers efficiency and equity, encourages residents to stay through predictable and reliably lower rates, and incentivizes economic growth and investment in the Commonwealth that create more jobs. 

For all the concern of the social justice establishment for low or no-income Virginians, they regularly ignore the fact that driving taxpayers away leaves fewer taxpayers to bear the burden, that without businesses or investment, there are no jobs – and that the best poverty program is a job.

Chris Braunlich is Senior Advisor and Past President of the Thomas Jefferson Institute for Public Policy.  He may be reached at

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