Taxes are likely to rise in Virginia, if the Democrats win the election being held this Tuesday.
Last May, Virginia’s Republican Governor, Glenn Youngkin, vetoed a bill to allow all counties to raise the sales tax by 1%. Virginia’s Democratic legislature tried to override his veto, but fell short of the two-thirds vote needed to do so, in a 25-to-15 vote in the state senate. Analysts said most local governments would have raised their sales tax had the bill become law. That’s because local sales taxes are paid partly by non-residents, giving municipalities an incentive to tax each other’s citizens by raising the sales tax. If a municipality raises its local sales tax, it keeps all of the revenue, but its residents don’t pay all of the cost — people from outside the municipality who can’t vote against the tax do.
If it had become law, taxes would have risen further in Virginia, a state that already had higher-than-average tax rates, according to the Tax Foundation.
Now, Democrats are favored to win the governor’s race in Virginia, although there is a very close race for state attorney general, and several state legislative races will be very close. The Real Clear Politics polling average shows the Democratic candidate for governor leading by a comfortable 9%, while Republican attorney general Jason Miyares is barely ahead of his Democratic challenger, leading Democrat Jay Jones by a razor-thin 1.6% margin. The Democrats’ lead in the governor’s race is fueled by the deep unpopularity in Virginia of Donald Trump.
Without a Republican governor to veto legislation authorizing increases in the sales tax, the sales-tax increase measure is almost certain to become law. Democrats uniformly supported the sales-tax-increase bill in 2024. Analysts expect the Democrats to gain more seats in the Virginia House of Delegates this election. That will enable tax increases to pass the legislature by an even bigger margin.
In neighboring Maryland, the replacement of a Republican governor with a Democratic governor led to tax increases enacted by the state’s Democratic legislature and signed into law by the Democratic governor. That included capital gains tax hikes, income tax hikes on higher-income households, and onerous new technology and bullion taxes that drove businesses out of the state (including a business owned by a Maryland Democratic legislator).
In Virginia, Democratic legislators have proposed raising taxes from 5.75% to 7% or 10% for high-income households.
A Democratic victory could also lead to costly new regulations, the way red tape in Democratic Maryland is increasing. Realtors say Maryland’s new energy regulations will increase the cost of housing for many tenants, by up to $400 per month.
By contrast, Youngkin’s regulatory reforms reduced the cost of building a house in Virginia by $24,000 on average, according to the National Review. It says that Governor Youngkin’s regulatory reforms have saved Virginians $1.2 billion per year and eliminated 11 million unnecessary words from state regulatory documents.
