VCC Magazine Fall 2018

V irginia C apitol C onnections , F all 2018 7 Economic Upswing By Speaker Kirk Cox It appears that Virginia’s economy is finally hitting its stride after years of lackluster growth following the Great Recession. This economic upswing, and the bigger paychecks that come with it for Virginia workers, can be attributed to several factors, namely the federal tax cuts, a resurgence in defense spending and Virginia’s responsible budgeting and pro- business policies. Unfortunately, I fear that one policy proposal put on the table this summer would reverse those gains and slow our economic progress, while hitting the middle class with higher taxes. Governor Ralph Northam’s plan to utilize a technical glitch in the state tax law to spend an extra $500 million in collected revenue is misguided. The plan unfairly burdens hard working middle-class taxpayers, eliminating their ability to itemize key deductions and resulting in higher state tax burdens. A more prudent approach is to update Virginia law to fully implement the federal tax cuts, which will preserve the ability of middle class families to take key deductions and ensure they maximize their tax cuts. You may have heard the Northam administration refer to a federal tax cut “windfall” that will lead to approximately $500 million in new revenue each year. The “windfall” that would be used to fund Northam’s plan is really just the state collecting higher taxes from hard working middle class families. People will receive tax cuts at the federal level, but a technical provision inVirginia law will require people to pay more on the state level unless we fix it. One of the core components of President Trump’s tax cuts was the increase of the standard deduction. The “Tax Cuts and Jobs Act” increased the standard deduction from $12,700 for a married couple filing jointly to $24,000. This means some families who last year chose to itemize, will pay less taxes by claiming the standard deduction this year. Virginia law currently requires taxpayers who claim the standard deduction on their federal taxes to claim the standard deduction on their state taxes. In years past, more than 640,000 Virginia families who itemized their taxes, had deductions more than $12,700 but less than $24,000. They have deductions for things like mortgage interest, healthcare expenses, and real-estate property tax. For example, if a middle-class family in 2017 had $20,000 in itemized deductions for their federal taxes, they could also claim $20,000 in deductions on their state taxes. If that family has the same itemized deductions for 2018, their deductions are less than the new $24,000 standard deduction, so they will benefit more by taking the standard deduction on their federal taxes rather than itemizing. Since current state law requires the family to also claim the standard deduction of only $6,000 on their state taxes, they will have to pay taxes on an extra $14,000 of income on their state taxes. ($20,000 - $6,000= $14,000). Under the Governor’s plan, the money collected in higher middle class taxes would be used to make the Earned Income Tax Credit (EITC) fully refundable. The EITC was actually a Republican initiative that basically took all tax burdens away from low income families. For example, if a low-income family had an $800 tax bill and qualified for the EITC of $1,000 they would not have to pay any taxes since the EITC was greater than what they owed. Governor Northam now wants to take that a step further and make that refundable, meaning the family gets the extra $200 that was left over from the EITC. I fully support the EITC as a way to help low-income families, but I do not support taxing the middle class more to in return give extra money to families who already have a zero tax liability. So, how can we fix this and keep middle class families from paying higher taxes? I support allowing families to take full advantage of the federal tax cuts passed by the Trump Administration. We can do this by allowing a family to take the standard deduction on the federal level AND then allowing them to itemize on the state level. This will allow families to maximize their tax cuts. By preserving the ability to itemize state taxes, middle class families will be able to continue to deduct things like their mortgage interest, real estate taxes, personal property taxes, and healthcare expenses from their state taxes. Virginians work hard for their money. They work hard to put food on the table, pay their bills, and get ahead. They deserve to keep as much of that hard earned money as possible. Let’s invest in the middle class, allow them to keep more money in their pockets, and if we do that we will continue to see the positive impacts of the federal tax cuts right here in Virginia. The Honorable Kirk Cox is Speaker of the Virginia House of Delegates. supplies, and reduce the impact of other taxes that hit family budgets the hardest. To be clear—we can make the Earned Income Tax Credit refundable, just like the federal government and 24 other states do, without raising taxes, but by investing increased revenues where they will do the most good. These Virginians are in every locality in Virginia. These are our teachers, our law enforcement officers, our veterans. They work, they pay taxes, but those taxes take a bigger percentage of their income. They deserve a more level playing field. Virginians all want the same thing: good jobs to support themselves and their families, a good education for their children, and to live in healthy and safe communities. When we invest in these things, we’re investing in our people. That’s how we build an economy where everyone has a fair shot at success. That’s what I hope we can continue to do as we look ahead to the next legislative session. When we work together, we do the most good for the people of Virginia. Continued from previous page Virginia Capitol Connections 201 8 Download the Virginia Capitol Connections App Today! virginiaredbook.com In Service to Our Country Virginia Officials and their Military Service Order Online: wordsprint.com/vcc-publication-orders.html V V