BY DAVE RESS Daily Press, January 29, 2019
House Republicans’ revised plans for tax relief would have a $1.5 billion impact on state government revenue this year and next — more than the windfall the state expects to see as result of recent changes to federal tax law, state tax officials say.
Appropriations Committee chairman Chris Jones, R-Suffolk, proposed a new “lockbox” fund for any extra money the state collects because of those federal changes.State tax officials say doing so would cut general fund revenue by $518 million this year and $434 million next year.
But Jones said the money isn’t lost. His aim is to set those tax collections aside until legislators decide on a way to offset any increased state taxes Virginians paid.
“The thing people need to understand is, this is the taxpayers’ money. It is not the state’s,” he said.
He said he’s looking for a targeted tax relief proposal that returns funds to those people who will see higher state income tax bills because of the federal changes.
House GOP leaders think they’ve done that with a package allowing people to itemize deductions on their Virginia state income tax returns even if they opt to take a sharply increased (roughly doubled) federal standard deduction. Their proposal also increases the state standard deduction, though by a smaller percentage than the federal increase. It allows taxpayers to claim a deduction for state and local taxes that exceeds the federal cap of $10,000. It includes a new break for companies hit by the new federal “global intangible low-taxed income” tax.
State tax officials put the impact of these measures at $7 million this year and $574 million next year.
Jones said the combined figure for the impact — that $1.5 billion — looks high because the estimate crams tax collections for three years (calendar years 2018, 2019 and 2020) into two fiscal years (the current one ending June 30 2019 year and the following one ending June 30 2020).
House Republicans, no surprise, don’t agree with Gov. Ralph Northam and his Democratic legislative colleagues about what to do with the federal windfall.
Democrats want to use some of the money for tax relief for lower income Virginians, by making the earned income tax credit fully refundable.
Virginia currently caps its share of the credit at the amount of state income taxes owed, but this can mean many of the people entitled to the credit don’t get the full amount they are entitled to by their income and family size.
The House Finance committee has rejected this. Republicans object, saying it would give money to people who don’t pay income taxes, which they say is unfair. Backers of the credit refund idea say beneficiaries pay a disproportionate amount of their income on sales, excise and property taxes.
Senate Republicans, meanwhile, have proposed more than a dozen different ideas. Senate Majority Leader Thomas K. Norment Jr., R-James City, wants the caucus to agree on a single approach, and says one is percolating.
Dave Ress, 757-247-4535, email@example.com