Democratic Gov. Ralph Northam announced on Tuesday that he will include several tax cuts in his outgoing budget proposal, including the elimination of the state's share of the sales tax on groceries — a proposal that was a key campaign pledge of Republican Gov.-elect Glenn Youngkin.
Northam is asking the legislature to do away with the state's 1.5% tax on groceries. His proposal does not eliminate an add-on tax of 1% by localities.
Virginia is one of only 14 states that tax groceries.
Northam announced his proposal at The Market at 25th, a community-driven grocery store in Richmond's East End neighborhood. He first proposed eliminating the grocery tax when he ran for governor in 2017, but it was not a central theme of his campaign.
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Youngkin, who is scheduled to take office on Jan. 15, campaigned heavily on the issue, making it part of his “Day One game plan." He argued that the tax is regressive, hitting low-income people the hardest. Youngkin had urged Northam to include tax cuts in his outgoing budget.
“Gov. Northam’s budget proposal is a step in the right direction but does not entirely fulfill Virginians’ mandate,” said Macaulay Porter, a Youngkin transition aide. “We appreciate the Northam administration laying the foundation for these elements of the Day One game plan so that Governor-Elect Youngkin can hit the ground running on January 15th to begin executing on his key campaign promises and finish the job. ”
Speaker-designee Todd Gilbert had a more blunt assessment of Northam's tax proposals. "Now we know what it takes to get Virginia Democrats to propose cutting taxes — losing to a Republican," Gilbert said in a statement.
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Sharon Wood, a retired registered nurse, said she has seen her monthly grocery bill go from about $200 to $350 over the past few months.
“I think it will really help in this inflationary time," Wood said of the proposed tax cut after shopping at a Food Lion store in Glen Allen, a Richmond suburb. “Every week I go (grocery shopping) and I see increases.”
State Secretary of Finance Joe Flores said 1% of the revenue from the state's 1.5% share of the tax goes to school districts, while the other 0.5% is earmarked for transportation projects. Flores said Northam's proposed budget makes up the revenue that will be lost by school districts.
“They will receive the same amount of funding that they are currently receiving from the state," he said.
Flores said the revenue that would go to transportation projects is not made up for in the governor's budget proposal, but the state will receive additional federal transportation money under the infrastructure bill passed by Congress last month.
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Northam, who is scheduled to present his budget proposal to the legislature's money committees on Thursday, is also proposing that the state give one-time “economic growth” tax rebates of $250 for individuals and $500 for married couples; make up to 15% of the federal earned income-tax credit refundable for eligible families; and end the accelerated sales tax payments for retailers.
Northam said Virginia's strong economic position allows the state to reduce taxes and to pay for other provisions in his budget proposal, including raising salaries for teachers and law enforcement and funding historically Black college universities at record levels.
“Many professionals made it through the pandemic fine, as their work simply moved online. But workers haven’t been so lucky when their jobs require close contact with other people," Northam said. "Virginia can help working people by eliminating the state grocery tax, providing one-time rebates, and giving a tax break to people who are working.”
In addition to eliminating the grocery tax, Youngkin pledged during the campaign to suspend the most recent gas tax hike for a year; offer a one-time tax rebate of $300 for individuals and $600 for joint filers; cut income taxes by doubling the standard deduction; cut taxes on veterans’ retirement income; and implement a requirement that voters approve increases on local property taxes.
Younkin defeated former Gov. Terry McAuliffe, a Democrat, in the Nov. 2 election.