Virginia's Democrat-controlled House and Senate are proposing dozens of tax increases, which could cost Virginian families billions of dollars a year in new taxes.
Upwards of $37 Billion in Potential Tax Increases over 5 Years
7 proposed bills would raise taxes by an estimated $6.6 billion in fiscal year (FY) 27.
These tax increases would be more than 300% more than the previously forecasted growth in VA taxes between FY26 and FY27.
An eighth tax (on payroll) would go into effect FY 29, when it would raise taxes by an additional $1.5 billion per year.
Together, these taxes would raise taxes by more than $37.2 billion over 5 years (FY 27-31), not including other proposed tax increases with no fiscal impact statements.
Proposing New Taxes and Expanding Old Ones
Create a new 10% top income tax bracket: HB188 ($3b).
Reduce the state sales tax rate from 4.3% to 4% but expand the tax to more services, as well as increase the local sales tax in certain Northern Virginia cities and counties, add a retail delivery fee in Northern Virginia, and increase the highway use fee by 30%: HB900 ($2.6b).
Establish a payroll tax beginning in FY 29 to fund a family and medical leave program, with the tax rate set annually by the Virginia Tax Commissioner: HB1207 ($1.5b).
Create a new 3.8% Net Investment Income Tax (NIIT) on certain investment income that would apply on top of the regular income tax: HB378 ($475m).
Create a regional sales tax; impose a statewide flat fee on retail deliveries; add a 4.3% tax on certain transportation revenues; add a regional parking tax; and increase the highway use fee by 30%: SB638 ($443m).
Impose a constitutionally questionable 11% tax on manufacturers’ firearm and ammunition gross receipts: HB1094 ($64m).
Change VA’s tax code to conform less to the federal tax code, making state taxes more complicated and leading to higher taxes: SB664 ($118m1).
Impose a $500 excise tax on sales of firearm silencers: HB207 ($4m):
Some of the other proposed tax increases include: a tax on fantasy football and other contests, a tax on plastic bags, a local lodging tax, a local tax on admission to events, taxes on data centers and data center equipment, higher taxes on loss-making companies, other local sales taxes, local taxes on land, a tax on utilities, and an extension of a tax on peanuts.
Virginia’s Top Income Tax Rate Could Soar to #1 in the Nation
VA’s top income tax rate could increase from 5.75% to 13.8%.
VA is currently a top-20 state for income taxes. This change would instantly catapult VA to the highest effective tax rate of any state.
The proposed income tax hikes would take nearly $3.5 billion more per year out of the hands of Virginia’s families and taxpayers.
High Taxes Drive Unaffordability
The 3 states with the highest top income tax rates are also among the top-5 states for highest costs of living.
High top-rate income taxes hammer small and midsize pass-through businesses, and those costs show up as higher prices for consumers.
High-tax California and New York lost 2 million residents who moved to other states in just over 3 years.
High-income individuals are especially likely to flee from high taxes.
In 2024 earners with incomes over $100,000 accounted for 78% of Virginia’s total income tax liability. Losing those high contributors could reduce tax collections and trigger further hikes to make up the difference.
Bottom Line
Virginia’s new Governor, Abigail Spanberger, campaigned on affordability but the bills proposed in the Virginia General Assembly would saddle Virginians with higher taxes and higher costs.
