Richmond, VA — Just before the governor unveils his budget proposal, The Commonwealth Institute (TCI) has released a new report outlining a proposal to raise $1 billion to invest in public programs, such as education, housing, and more. TCI’s proposal to add a new income tax bracket for higher incomes is in stark contrast to major tax proposals that elected officials discussed earlier in the year, which would have primarily benefited the wealthy and large corporations.
“Whether we have $10 to our name or $10 million, we all want to live in a state where every student in every zip code can access a high-quality public education and where our neighbors have safe and affordable housing,” says Megan Davis, tax policy analyst at The Commonwealth Institute. “We can do more than just imagine the Virginia we would live in if we had the resources to make transformational investments in our communities because our tax code could be a critical tool to make those visions a reality.”
Virginia’s tax code is currently upside-down, where the wealthiest pay the least taxes as a share of income, and it puts a teacher making the average state salary of $61,367 in the same top tax bracket as a millionaire. TCI recommends that lawmakers take up an option presented by the legislature’s research agency (JLARC) to add a 10% tax bracket for taxable income over $1 million. JLARC estimates that just 17,700 Virginia tax filers would pay the higher rate, and that 99.6% of filers would not pay this “millionaire’s tax,” as it is often referred to across the nation.
“Lawmakers have made some recent progress in addressing Virginia’s upside-down tax code, such as improving the state’s Earned Income Tax Credit,” says TCI’s President and CEO, Ashley Kenneth. “However, more work needs to be done to create a truly fair tax structure that ensures the wealthiest among us are paying their fair share and provides the resources needed to invest in communities.”
In addition to raising $1 billion in revenue to invest in long-underfunded programs such as the public education system, the report addresses concerns often voiced by elected officials. TCI notes that:
- State tax policy rarely influences where someone lives, and claims about how millionaires would respond to a higher income tax are largely overblown.
- A millionaire’s tax would help shield Virginia from a possible mild recession that budget forecasters anticipate.
- The new tax bracket could safeguard against program cuts, such as those that occurred in the wake of the Great Recession and are still impacting communities today.
A millionaire’s tax is an increasingly popular strategy to create sustainable revenue streams. In 2004, California added a surcharge for taxable personal income over $1 million to invest more in the state’s behavioral and mental health system. More recently, Massachusetts voters approved a Fair Share Amendment in 2022, and the state has since invested $1 billion of the collected revenues in education, public transit, roads and bridges, and child care. Washington, D.C., also made changes in 2022, further increasing their millionaire’s tax. Paired with other tax choices, the district raised a combined $100 million in new revenues, enabling greater investment in affordable housing and eviction prevention.
The full report, “Fair Share Taxes: A Simple, Effective Solution to Invest in Our Communities,” can be found at www.TheCommonwealthInstitute.org
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. Visit www.thecommonwealthinstitute.org for more information.