Governor Glenn Youngkin (R) on Wednesday proposed a two-year budget that will see Virginia’s income tax rate decrease, but paired the cut with a sales tax increase that will see some parts of the commonwealth pay nearly 8 percent sales tax.
Youngkin presented his “Unleashing Opportunity Budget” before the Virginia House of Delegates by noting migration trends within the United States that show Americans moving to states with lower taxes and more jobs.
“When we started this journey, Virginia was falling behind, ” the govern said.
Youngkin explained that “Americans and Virginians [were] choosing to go” to neighboring states which “had lower taxes or had started their journey to lower taxes.” Youngkin noted that the states responsible for creating the most jobs are also receiving the largest population increase from other states. The governor said that “Virginia must compete even harder” to remain attractive to Americans workers and businesses.
Youngkin said cutting the highest state income tax in the commonwealth from 5.75 percent to 5.1 percent would save Virginians about $1.1 billion. The loss in state tax revenue will be offset by a 0.9 percent increase to Virginia’s sales tax rate from 4.3 percent to 5.2 percent, the governor explained.
If passed, the increase will mean James City County, Williamsburg, and York County will pay a 7.9 percent sales tax. At least eight other counties and 20 cities in Virginia have imposed local sales taxes that will be levied in addition to the commonwealth sales tax.