Gov. Northam proposes tax reductions for working Virginians including cutting state's sale tax on groceries, $250 one-time tax rebates

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Posted at 11:56 AM, Dec 14, 2021
and last updated 2021-12-14 11:56:32-05

RICHMOND, Va. - As Governor Northam continues his 'Thank You, Virginia' tour, he announced Tuesday a tax reduction for working Virginians.

The Governor pointed out that many of Virginia's working people have not experienced the 'booming national economy' that has helped many professionals and office-based workers get ahead and build wealth during the pandemic.

“When Virginia cuts taxes next year, it should be done in a way that benefits working people,” said Governor Northam. “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. Some jobs simply can’t move online—restaurant workers, early childhood educators, home care attendants, and others—and we all depend on the people who do this work. 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.”

The Governor proposed four changes to Virginia's tax policy at The Market at 25th, a community-driven grocery store in Richmond’s East End.

Northam proposes to eliminate the state's sale tax on groceries. When Northam ran for governor in 2017 he first proposed this change for low-income, but says now the state's economic strength makes it possible. Virginia's state grocery tax is 1.5%. Most states do not tax groceries.

He is also proposing to provide an income tax cut for working families. Northam proposed to make up to 15% of the federal earned income tax credit (EITC) refundable for eligible families, which will give a tax break to working families who need it most.

The EITC reduces the amount that low- and middle-income working people owe in taxes. Making it “refundable” means people will get a refund from the state if they are working but earning income below a certain level. The amount depends on income level, marital status, and family size.

In addition, Northam is proposing one-time tax rebates to everyone who files state income taxes in Virginia—$250 for individuals and $500 for married couples. In 2019, Governor Northam offered $110 for individual filers and $220 for married couples.

Northam is also looking out for retailers. In 2008, Virginia started requiring many retailers to pre-pay their tax payments before even collecting money. Now the governor is proposing to end the accelerated sales tax payments.

According to Northam, these plans are expected to reduce state revenues by a total of $2.1 billion. He said his budget proposal also will put $1.7 billion into the Revenue Stabilization Fund, set aside $1 billion for the Virginia Retirement System, and allocate $2.8 billion for capital projects in state government and higher education buildings.

“Virginia has been named the best state for business for three years running and we have a remarkably strong economy, but not everyone is benefitting equally,” said Delegate Lamont Bagby, chair of the Legislative Black Caucus. “This tax plan focuses on Virginians who need help and who have largely not benefited from our strong economy. This is the right way to help working people and provide equity in our tax policy.”