Democrats now in the minority in the House of Delegates have discovered a form of tax relief that Gov. Glenn Youngkin doesn’t support — one meant to directly benefit low-income working families.
Minutes after endorsing $1.2 billion in one-time taxpayer rebates on Monday, a House Finance subcommittee shot down a proposal to make a portion of the federal earned income tax credit refundable to low-income families, allowing them to receive the benefit even if they don’t pay the full amount in off-setting taxes.
The administration’s contrasting positions — delivered by Deputy Secretary of Finance Charles Kennington — struck a nerve with Del. Candi King, D-Prince William.
“So what it appears is that you really oppose anything that specifically benefits low-income families, and that is extremely problematic for me and my district,” King told Kennington.
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“If we are going to talk about lifting all boats, then the low-income boat should be one of those,” she said.
Her remark drew a rebuke from Del. Kathy Byron, R-Bedford, who then made the motion to kill the tax credit bill introduced by Del. Cia Price, D-Newport News.
“That’s not a fair statement,” Byron said before the subcommittee killed the bill on a 5-2 party-line vote, arguing that the governor’s tax relief package also would benefit low-income families.
The centerpiece of the governor’s $4 billion package is a one-time refund of $300 to each individual taxpayer and $600 for each couple filing jointly. It would go to anyone who paid at least that much in state income tax.
Youngkin also proposes to: double the standard deduction on state income taxes, which would reduce state revenues by more than $2 billion over two years; eliminate the sales tax on groceries, which would cut funding for local school divisions and state transportation; exempt up to $40,000 in military retirement benefits from income tax; and suspend a 5-cent increase in the gas tax for 12 months.
Separately, the administration backed off a proposal to make an expanded tax break retroactive for Virginia businesses that received emergency federal aid in the previous tax year.
Former Gov. Ralph Northam had proposed to lift the current limit of $100,000 that businesses could deduct from state income tax this year for the forgivable loans, which were tax-exempt.
Byron had included a provision in the annual tax conformity bill that would have offered the same treatment on taxes already paid for 2020, at an additional cost of $110 million in state revenue. She removed the provision in a substitute bill that the House Appropriations Committee adopted unanimously on Monday.
Democrats say the governor’s proposals would do less for low-income families with children, who would receive direct payment of the refundable tax credit, much as they did with the federal child tax credit paid through federal emergency aid last year. Currently, families can use the credit only to offset taxes they owe, but most states allow them to receive the remainder directly.
“We’re doing a lot of things for Virginia taxpayers this year. ... Let’s ensure we include everyone, particularly our little ones,” said Del. Rip Sullivan, D-Fairfax, who called the refundable tax credit “the most effective tool in our toolbox for helping low-income Virginians” and their children.
In a meeting dominated by party-line votes, former House Finance Chair Vivian Watts, D-Fairfax, took a bipartisan approach to Youngkin’s tax rebate proposal, which current Finance Chair Roxann Robinson, R-Chesterfield, introduced on behalf of the governor.
Watts said she supports the one-time tax refunds as a form of relief that would mean more to those who have less.
“It is a much bigger help for someone at low income,” she said, joining with Republicans on a 6-2 vote to endorse the proposal and refer it to the House Appropriations Committee to assess its effect on the state budget.
Former Gov. Ralph Northam, a Democrat, included about $1 billion in his parting two-year budget to provide one-time refunds of $250 for individual taxpayers and $500 for couples. Robinson’s legislation would increase the amounts to $300 and $600, respectively, at an additional cost to the state of more than $200 million.
Subcommittee Chair Joe McNamara, R-Roanoke County, said the cost would be covered by the $2.6 billion revenue surplus that Virginia recorded in the fiscal year that ended on June 30.
Sullivan said he “prefer to see something a little more targeted,” rather than the same amount of refund to all taxpayers, regardless of income.
“There are a lot of wealthy people in Virginia who really don’t need $300,” he said.
Former House Finance Chair Lee Ware, R-Powhatan, called the tax rebate proposal “the best of the choices presently before us,” and said its inclusion in Northam’s budget is evidence of “bipartisan support for this measure moving forward.”
There was no Republican support for Price’s proposal to make 15% of the earned income tax credit refundable, even though she estimated the number of people in each delegate’s district who would benefit from it, including about 7,400 in Robinson’s district in Chesterfield.
Like the tax rebate, Northam proposed making 15% of the earned income tax credit refundable in his proposed budget at a cost of more than $300 million. “We need to make sure it’s focused on the people who need it the most,” he said during his budget presentation in December.
Initially, Price had proposed to raise the threshold to 20%, which would have cost an additional $105 million over two years, but she asked the committee to amend it Monday to be consistent with Northam’s proposal.
The idea received public support from the Commonwealth Institute for Fiscal Analysis and Voices for Virginia’s Children.
“We’ve seen how these direct payments can really help low-income families,” said Emily Griffey, policy director at Voices for Virginia’s Children.
Price said the distinction by income is relevant to the broader effort to provide tax relief to all Virginians.
“We’re hearing that word ‘all’ a lot,” she said. “I would just say that equality and equity are very different in these proposals.”
