August 19, 2018
While the headline above is not “new news” as the drama of the annual General Assembly Session frequently hinges on the negotiation between what the Governor proposes and the General Assembly opposes; in this case the question is one that we may care a great deal about! A little background:
- There were major tax reforms at the federal level last year which will effect 2018 taxes – popular media has painted the tax reform as mostly helping the very rich.
- At the federal level, the standard deduction was nearly doubled – this will encourage many more middle income taxpayers to use the standard deduction rather than itemizing deductions (eg. deducting mortgage interest, real estate taxes, and healthcare expenses).
- State law currently requires that taxpayers use the same method of calculating deductions on their state tax as they use on their federal taxes.
- The state expects a windfall of up to $500 million dollars when Virginian’s file their 2018 taxes!
Now the opposing proposals – the Governor proposes using the windfall to “refund” the difference between the amount of Earned Income Tax Credit an individual qualifies for and the amount of tax they actually owe. This would benefit those working adults at the lowest income levels, i.e., many of our DSPs.
The General Assembly finds that this would simple force many middle income individuals to pay higher taxes and shift the benefit to others. Maintaining Virginia’s current tax law potential has a detrimental effect on many small business owners who pay personal taxes on the income from their business enterprise. This will be detrimental to many small providers!
VNPP has historically not weighed in at all on tax legislation – the Board will need to decide if this year we need to develop a position!