RICHMOND, Va. (WRIC) – Gov. Glenn Youngkin’s hopes of cutting Virginia’s corporate tax rate face an uncertain future as one budget negotiator said the proposal is “clearly off the table,” and another insisted it is still alive.
The General Assembly approved a stop-gap budget bill in February to fund programs needed across Virginia and to give leaders of the legislature’s money committees more time to iron out specifics, including Youngkin’s proposal for $1 billion in new tax cuts that split Democrats and Republicans.
But lawmakers negotiating revisions to the two-year state budget have been stuck “in a holding pattern” as they wait to get a better idea of Virginia’s economic future amid concerns of a possible recession this year, state Sen. George L. Barker (D-Fairfax), co-chair of the Senate Finance Committee, told 8News.
The Republican budget negotiator, House Appropriations Chair Barry Knight (R-Virginia Beach), said they are monitoring several factors while discussing the spending plan, including Virginia’s unemployment rate, the stock market and how higher interest rates impact businesses.
“We don’t know how our revenues are going to do,” Del. Knight said in a brief interview Wednesday.
While this uncertainty has kept them from making commitments that can’t be met, Knight and Barker stressed they are in no rush because lawmakers already passed a two-year state budget that will last until the end of next June.
When asked if any of the governor’s proposals are nonstarters in the budget talks, Barker told 8News the 1% corporate tax rate cut is “clearly off the table.”
“Nobody has been asking for that,” the senator told 8News in an interview Wednesday.
House Republicans have backed Youngkin’s proposals to cut the corporate income tax rate from 6% to 5% — a move his administration said would help entice companies to Virginia — and reduce the top income tax rate from 5.75% to 5.5%.
Senate Democrats haven’t dismissed all the proposed tax cuts but have made their opposition to the corporate tax cut clear. They believe the $3.6 billion surplus Youngkin has touted as a way to pay for both tax cuts and make investments in education and mental health should fund other initiatives.
Knight said compromises are part of budget negotiations, but they lack a clear picture of the state’s revenues for the upcoming fiscal year, so nothing is set in stone.
“Everything now is back on the table,” Knight told 8News. “I know what I want, and they know what they want, but we’re not going to get everything we want because there’s not enough money.”
Two weeks ago, Youngkin said there was “plenty of money” for his proposed tax cuts and key investments in the state’s education and behavioral health systems.
Youngkin spokesperson Christian Martinez echoed that stance in a statement Thursday lauding last year’s budget deal with $4 billion in tax cuts as proof that “tax cuts don’t have to be a partisan issue.”
“We’re on the right path but Virginians are still overtaxed,” Martinez wrote. “With general fund revenue collections continuing to exceed projections this year, Governor Youngkin remains confident in our ability to deliver additional tax relief of more than $1 billion for families and businesses, while also making critical investments in behavioral health, education and law enforcement.”
Knight said negotiators are set to meet next week and have a series of other meetings planned to discuss budget amendments, including possible provisions on cities eligible for casino licenses.