The economic recovery that began more than a year ago in Virginia is still picking up strength, as state revenues surged by almost 46% in April, compared with the same month a year earlier.
With less than two months left in the fiscal year, the state has collected about $3.6 billion more in the first 10 months of the year than it did during the same period a year earlier and $1.9 billion more than in mid-February, when Gov. Glenn Youngkin raised the revenue forecast for the still-pending state budget.
“Virginia’s economy continues to show encouraging signs of growth,” Youngkin said Thursday. “We’re growing jobs, growing paychecks, and more people are joining the workforce.”
“This report confirms the strong trajectory forecasted for state revenue and we continue to see mounting evidence that the time is now to cut taxes,” added the governor.
Youngkin is pressuring the General Assembly to adopt a pair of new budgets — one for the fiscal year that ends June 30, the other for the two-year cycle that starts July 1 — that would cut taxes by about $5.5 billion.
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Much of the revenue surge in April came from quarterly and final income taxes that self-employed Virginians and investors filed before the May 1 filing deadline.
Comparing revenues from year to year remains a challenge because of different filing deadlines last year and this year for income tax returns and payments that account for more than 70% of the money Virginia collects for the state general fund. It pays for core services such as education, health care and public safety.
This year, Virginia returned to a May 1 filing deadline, but many taxpayers filed on April 18, the day that federal income tax returns were due. In 2020, the state delayed the deadline until June 1, after the federal government moved its tax deadline to mid-July. Last year, the state set the deadline at May 17.
“We will need to look at the combined results of April and May compared to last year to know the overall trends in this category,” Secretary of Finance Steve Cummings said in the governor’s announcement.
Cummings noted that the state also had 4.8% more income taxes through payroll withholding, even with one less deposit day in April than the same month last year, and 8.4% more in sales taxes than it did in the previous April.
Those revenue sources were “unaffected by that timing difference,”’ he said, adding that “this trend speaks to the uptick in jobs, consumer activity and inflation.”
The April revenues represent a dramatic recovery from two years ago, a month after the COVID-19 pandemic began, when state revenues plummeted by $700 million in April 2020 compared with the same month in 2019.
Last year, with people becoming vaccinated against the coronavirus disease for the first time, revenues rose 42% as the state collected $2 billion more in the first 10 months than it had in the same period during the depths of the pandemic in 2020.
For the first 10 months of the fiscal year that began on July 1, Virginia’s total revenues have increased by 19%, compared with the same period a year earlier and a budget forecast of 9.2% growth expected for the entire year.
Income withholding taxes, the largest single source of state tax revenue, was up by 9.5% for the year to date, compared with the previous year and an annual forecast of 9%. Sales tax collections rose by 14.4% for the year through April, or 3 percentage points ahead of the annual forecast.
When Youngkin ran for governor last year, he said the state’s economy was “in a ditch,” despite the surge in state revenues that produced a $2.6 billion surplus at the end of the fiscal year on June 30.
He remains concerned about Virginia’s slow recovery of jobs lost during the pandemic — ranking 47th among states — but he said state employment rose by 42,000 from January, when he was inaugurated, through March. Virginia ranked 14th among states for employment growth in the period.