RICHMOND, Va. (WRIC)-Governor Glenn Youngkin wants to set aside nearly $400 million for another round of tax relief but some argue the proposal is premature amid fears of an economic downturn.
It’s among the items expected to be included in a package of budget recommendations Youngkin will unveil in December. The governor laid out an initial framework in a speech on Friday during a joint meeting of House and Senate money committees.
“We have enacted historic change with our Day One Agenda, and we’re just getting started. Just wait for Day Two,” Youngkin said.
Youngkin will propose assigning $397 million to a fund designated for taxpayer relief. He described it as a starting point to support tax cuts in the near future and later in his term.
“We don’t have specific proposals yet other than we have a wholesale challenge. We continue to see taxes high in Virginia relative particularly to the states around us,” Youngkin told reporters after the speech. “This is a down payment in what I truly believe will be a much broader package of tax reduction.”
Those comments come as roughly $4 billion in tax relief approved by lawmakers earlier this summer is still being implemented. The General Assembly increased the standard deduction, cut the state’s portion of the grocery tax and authorized one-time rebates for eligible taxpayers, among other things. Lawmakers also authorized large new investments in education, mental health infrastructure, affordable housing and state employee raises.
Youngkin announced on Friday that the state government spent roughly $1.2 billion less than what was appropriated by the General Assembly. He said that money, combined with roughly $2 billion in unplanned revenue, means Virginia has a cash surplus of $3.2 billion.
“The right thing to do is return unplanned revenues to taxpayers. Again, it’s not our money; it belongs to the hardworking taxpayers of Virginia,” Youngkin said.
In an interview after the presentation, Senate Finance and Appropriations Committee Chair Janet Howell (D-Fairfax) said Friday’s fiscal update was “the best she has heard in her 30 years.”
But Howell thinks it’s too soon to tease more tax cuts.
“I am concerned about calls for tax relief when we’re in such unsettled waters. We don’t know what it is going to be like in several months. Hopefully we’ll be able to do some tax relief, but it’s not necessarily in the bag and I wouldn’t want people to get their hopes up,” Howell said.
Asked if he’s worried about having to roll back his proposal due to recession fears, Youngkin said, “I’m not concerned. The budget that has been set for fiscal year 2023 has over $4 billion of cushion in it relative to where we ended up fiscal year 2022. That $4 billion of cushion I think does provide us comfort against areas of our revenue collections that are more volatile.”
During his speech, Youngkin said the consensus from Virginia’s top business leaders is that, while the months ahead may be rocky at the national level, the state is well suited to navigate rough seas. He said to ensure economic security, his focus will be on developing a talented workforce, reducing business taxes and cutting red tape to attract new jobs.
Youngkin said he is pleased with the 100,000 jobs added since January, though he noted the pace of growth slowed down this month.
Youngkin said other portions of the surplus have already been reserved for the rainy day fund and pre-planned spending, including investments in the state’s retirement fund, widening I-64, water quality improvements and economic development projects.
Youngkin was not specific about what additional investments he may propose in December but he laid out some guiding priorities. He spoke about the “rash of violent crime” and the ”pervasive mental health crisis.” He said previous administrations left the state “woefully behind” on its commitment to the Chesapeake Bay. He also emphasized the lack of affordable housing in the state.
“The solution to this problem is not more subsidies or loan programs. Instead, we must tackle the root causes: unnecessary regulation, over burdensome and inefficient local governments, restrictive zoning policies and an ideology of fighting tooth and nail against any new development,” Youngkin said.
Howell said she would like to see some unplanned revenues put towards things like mental health and foster care.
“My emphasis is always on human services. Virginia has always lagged behind the needs of our most vulnerable,” Howell said.
After calling Youngkin’s comments on crime vague, Howell agreed with his prioritization of the Chesapeake Bay. However, she took issue with Youngkin’s characterization of the solution on affordable housing.
“I’m always amused by the talk about red tape because Virginia has very little,” Howell said. “Unless somebody can come up with a better idea, which so far they haven’t, I think we’re going to need to do subsidies.”
Youngkin’s budget recommendations will need to win approval in a divided General Assembly to become a reality.