Gov. Youngkin Budget Proposals Ignore Families with Greatest Needs, Create Retroactive Tax Giveaways for Businesses
TCI analysis shows new governor’s budget proposals would do little to help struggling families and instead reduce the ability of Virginia to meet its commitments
VIRGINIA – Today, The Commonwealth Institute for Fiscal Analysis (TCI) released the following statement on Gov. Youngkin’s legislative and budget priorities document, which was released on Friday, January 21:
“These proposals would reduce the ability of the state to meet its commitments to Virginia families, including its commitments to providing a high-quality public education, affordable access to a higher education, and healthy communities,” said Ashley C. Kenneth, President and CEO of TCI. “Instead of providing targeted help for struggling families and restoring support for public schools, Gov. Youngkin proposes $3 billion of poorly targeted tax changes with no proposal for how to pay for them, including a $110 million retroactive tax break for businesses.
“Virginia’s robust economic recovery means the state has more resources than expected to help families and communities and invest in the future. Fundamental to this is restoring our commitment to public K-12 and higher education. Legislators should use available and new resources to increase opportunity and build a better future for every Virginia family.”
Analysis of the major tax provisions shows that many low-income families who pay a larger share of their income in state and local taxes than those with the highest incomes would be excluded from the benefits.
Doubled standard deduction and nonrefundable $300 and $600 rebates ($2,298,400,000)
Recent TCI analysis shows that these policies would exclude nearly 80% of taxpayers with incomes below $24,000.
Income tax subtraction for military retirees ($515,000,000)
Virginia already provides additional income tax benefits of up to $12,800 for each taxpayer 65 years of age or older, in addition to the standard deduction and personal exemption amounts that are available to all tax filers. As a result, additional subtractions for military retirement benefits would provide the largest benefit to middle- and high-income households.
Business tax credit of up to $250,000 ($75,000,000)
The proposed tax credit would be available to businesses with fewer than 50 employees and up to $10 million in gross receipts in 2022 and to self-employed people. The credit could be “carried forward” for up to five years, which means it would be able to reduce taxes for those businesses in future years as well.
Retroactive business tax deductions ($110,000,000)
The General Assembly provided additional tax deductions of up to $100,000 for Paycheck Protection Program (PPP) recipients for 2020. The new proposals would retroactively provide these businesses with additional tax breaks. A new National Bureau of Economic Research working paper found that about 75% of PPP funds went to the highest-income households and benefits flowed overwhelmingly to business owners and shareholders.
Chris Wodicka, senior policy analyst at The Commonwealth Institute, further explained that “The retroactive tax cut for businesses is hidden within the legislative proposal to change federal tax conformity, without a matching budget proposal to show its costs. Virginia is required to have a balanced two-year state budget, so this windfall for business owners will be paid for by reduced public investment elsewhere, putting funding for early childhood, K-12 public schools, higher education, health care, and environmental protection at risk.”
About The Commonwealth Institute
The Commonwealth Institute for Fiscal Analysis advances racial and economic justice in Virginia by advocating for public policies that are designed in partnership with people most impacted, and shaped by credible, accessible fiscal and policy research. Our independent research and analysis drives key state budget, legislative, and policy changes that break down barriers and create opportunity for people and communities across Virginia. Visit www.thecommonwealthinstitute.org for more information.