Virginia budget to be debated at a later date amid tax, spending disagreements

By Tyler Arnold

(The Center Square) – After Virginia lawmakers failed to reach an agreement on the state budget amid a series of tax and spending disagreements, the General Assembly adjourned its session and will meet again at a later date.

Rather than extending the session when lawmakers missed their budget deadline, they chose to carry the legislation over to a special session. When they meet for the special session, which has yet to be scheduled, they will need to debate the specifics of a grocery tax reduction or elimination, the state’s standard deduction and whether to suspend the gasoline tax.

“This is an extended opportunity for taxpayers to advocate for a return of some of their own money,” Chris Braunlich, the president of the free-market Thomas Jefferson Institute, told The Center Square.

“With a budget surplus well north of $15 billion largely due to state tax policies, it should not be too much for taxpayers to get a bit more of it back so they can plan for a time of skyrocketing inflation,” Braunlich said. “Elections have consequences, and the trajectory of November’s election is towards reducing Virginians’ tax burden. That trajectory will certainly increase in 2023, should the State Senate refuse to offer taxpayers a fair share of their own money.”

The House of Delegates, which is controlled by Republicans, proposed several tax cuts. The largest cut would be through doubling the standard deduction. Doubling the standard deduction for single filers from $4,500 to $9,000 and for married filers from $9,000 to $18,000 would create a broad tax cut that would extend tax breaks to more middle class families. The plan has received opposition from the Senate, which is controlled by Democrats. The Senate wants to keep the current law in place, which would maintain the current standard deduction until 2026 and decrease the standard deduction thereafter, which would lead to a tax hike on some middle class Virginians.

Republican lawmakers argued that the state should use its surplus funding to broaden its tax cuts, but Democratic lawmakers argued that tax relief should be focused primarily on poorer Virginians.

House Majority Leader Terry Kilgore, R-Gate City, praised the House version of the budget and criticized Democrats for the delay.

“I’m proud of the budget that we passed in the House, and I’m proud of what it does for all Virginians,” Kilgore said in a statement. “When Governor Youngkin calls us back to Richmond, I hope Democrats will work with us and let the people’s business proceed.”

Senate Finance and Appropriations Committee Chair, Janet Howell, D-Reston, said the Senate version of the bill provides important funding for education and healthcare.

“While budget negotiations remain ongoing, Senate conferees will work to maintain the original Senate budget funding to invest in the futures of Virginia’s students; provide health resources, particularly behavioral care, for everyone in the Commonwealth; and assure economic strength for every family,” Howell said. “I look forward to continuing this important process to produce a healthy, responsible, and balanced budget.”

Another debate between the two chambers is whether to suspend the state’s gasoline tax increase amid soaring gas prices. While Republicans say the relief would help struggling Virginians, Democrats argued that it would cripple transportation funding. The two sides are also debating the grocery tax. Although both seek to eliminate the 1.5% tax collected, House Republicans also want to end the 1% local option and reimburse localities for the funds lost.

The two sides have also had disagreements over education funding. Republican lawmakers support bills that would divert some education funding to support school choice opportunities for parents and students, while Democrats have opposed the school choice funding and support bolstering funds for the current public school system. Although both sides support increasing pay for teachers, the Democrats support a 5% raise and Republicans support a slightly lower 4% raise.

Choosing to continue discussion during a special session, rather than simply extending the session, should not increase any costs for taxpayers because costs would be the same regardless of whether they meet now or later, according to Steve Haner, a senior fellow for state and local tax policy at the Thomas Jefferson Institute.

“The main marginal cost is the per diem and travel payments to legislators, the same whether the session is extended or for a special session,” Haner said. “Most of the staff are permanent employees anyway. It is unfortunate the habit of not meeting the session deadline seems to have settled in and become the standard.”

To complete the budget, lawmakers will need to create a bipartisan bill so it can pass both chambers and be signed by Republican Gov. Glenn Youngkin.