Remember that tax cut the president signed into law late last year? It cut many federal taxes. But, it may have also increased state taxes here in Virginia.
Federal taxes and state taxes are joined at the hip, a connection that’s becoming a bit uneven now that the federal government has broadened the tax base and cut tax rates. Virginia didn’t cut tax rates, although that larger tax base means the commonwealth is expected collect about $300 million in additional revenue next year.
Jared Walczak is a senior policy analyst at the Tax Foundation.
“Lawmakers face a choice. Starting next year, do they keep the additional revenue? Do they reverse the state changes? Or do they use this as a starting point for more meaningful tax reform?”
That could mean across the board tax cuts. Or maybe targeted tax cuts for low-income people, who didn’t get much out of the Trump tax cuts, as Governor Ralph Northam has already proposed.
Chris Wodicka at the Commonwealth Institute says lawmakers might want to think about investing in schools.
"Their funding remains down about 9.4 percent per student since the recession, and that has a real impact in our classrooms with fewer teachers and staff.”
The debate about what to do with the $300 million windfall will be one of the major issues facing the General Assembly next year, when lawmakers will choose between spending that money or giving it back to taxpayers.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
