Virginia is for Tax-Lovers?

Advancing American Freedom Foundation is a nonprofit institution that promotes and defends policies that elevate traditional American values,

PLYMOUTH INSTITUTE CENTER FOR STATISTICAL MODELING AND SCIENTIFIC ANALYSIS VIRGINIA IS FOR TAX-LOVERS? Preston Brashers, Research Fellow Philip Eigen, Policy Analyst FEBRUARY 18, 2026

TOPLINE: 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).

$443 $131.5 $118 $35.0

Income Sales Investment Transport Deconformity Ammo Firearms Payroll*

Household Increase (Avg)

Virginia Lawmakers Propose Major Tax Increases

Source: Virginia Department of Taxation; Virginia Department of Planning and Budget; U.S. Census Bureau

All taxes would take effect by FY 27, except for Payroll (Fy 29).

2 For more of our research and scholarship, visit our website: www.advancingamericanfreedom.com.

• 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.

BOTTOMLINE: 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.

1 Includes FY26 rollover.

📄 Download the full PDF