Federal tax overhaul likely means more revenue for Virginia
RICHMOND, Va. (AP) — The recent federal tax overhaul probably means Virginia will collect more state tax revenue — but from whom and how much are still unknown.
Secretary of Finance Aubrey Layne told lawmakers Wednesday that the impact of the federal tax changes is so complicated that the state needs an outside consultant and a couple more months to figure it all out.
But overall the new federal taxes are a “positive to us in terms of our revenue collections,” if the state tax code stays unchanged, Layne said.
The federal changes affect taxes incurred this year but possibly paid next year and will affect various state taxes for individuals and corporations in different ways. The state has hired Chainbridge Consulting to help sort through the impact, but Layne said the report won’t likely be ready until after the legislative session ends in March.
Some individual taxpayers could see a notable impact from changes in how taxpayers take deductions. The federal tax plan eliminates certain deductions but nearly doubles the amount of standard deduction to $12,000 for an individual and $24,000 for a married couple filing together.
That increase means more Virginians will probably take the standard deduction instead of claiming itemized deductions. In doing so, they will also have to take the state’s standard deduction, which remains at $3,000 for individuals and $6,000 for a married couple filing together, and likely pay more in state taxes.
Paying more in state taxes will likely be worth it to many, as they will see a drop in their overall tax bill because of the federal changes.
Virginia saw a large windfall in state taxes following the last major federal tax overhaul in 1986. That led to an overhaul of state taxes that included giving some of the money back to taxpayers.
But history may not repeat itself.
Republican Sen. Emmett Hanger, head of the Senate Finance Committee, said the increase in state revenues may be offset by cuts in federal aid to the state and Virginia needs to be cautious in spending any extra money generated by the federal tax changes.
“The federal government also — not having any money and creating a larger deficit — they’re going to be rolling back and pushing more responsibility on the states,” he said.