Jan 2, 2024 - News

Youngkin wants to increase Virginia's sales tax, but cut the income tax

Illustration of the Virginia State Capitol with lines radiating from it.

Illustration: Brendan Lynch/Axios

Gov. Glenn Youngkin's latest budget proposal includes an unexpected surprise from a GOP governor: a tax increase.

What's happening: Youngkin wants to bump the state's sales tax just under a percentage point, but only, he says, to help offset the cost of an even bigger cut to the state's income tax.

  • It's his opening offer to Democrats in the General Assembly, with whom he will ultimately have to strike a deal on the state's finances for the next two years.

Why it matters: The stakes are high for the governor. Because of the way the state's electoral and budgetary calendars align, this will be the only spending plan he guides from start to finish.

By the number: Youngkin is proposing increasing the state sales tax from 4.3% to 5.1%.

  • And he's proposing an across-the-board 12% cut to the state's income tax.

Of note: Youngkin also called to expand the state's sales tax to cover digital services, like streaming subscriptions, video downloads and software — which are currently untaxed in Virginia and many other states.

The big picture: Youngkin's administration estimated the changes would save taxpayers about $1 billion over two years.

  • In a pre-Christmas speech to lawmakers, Youngkin pitched them as a "bold tax reform" that "allows Virginians to keep more of their hard-earned money," per the Washington Post.

The other side: Democrats largely panned the proposal, arguing that hiking the sales tax while cutting the income tax would result in the very rich paying much less and the very poor paying much more.

  • "I don't like it," state Sen. Mamie Locke, D-Hampton, a senior member of the Senate Finance Committee, told the Times-Dispatch. "Sales taxes are regressive. They hit poor people harder."

A top Democrat in the House, Del. Marcus Simon, mocked the new digital sales tax in a lengthy spoof of the "Night before Christmas."

  • "New taxes were hung on the digital sphere, On streaming and downloads, spreading holiday fear," he wrote.

What's next: The General Assembly convenes next Wednesday for a session scheduled to last 60 days.

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