House Minority Leader Eileen Filler-Corn, D-Fairfax, recently accused a Republican lawmaker of spreading "incorrect information" about Gov. Ralph Northam’s proposed state budget.
"There is no tax increase in the governor’s plan," she said during a Jan. 15 floor speech, challenging opposite claims by Del. Tim Hugo, R-Fairfax. "Rather, the Commonwealth is responding to actions, again, by the Trump administration that clearly, also, exploded the deficit."
No tax hike proposed by Northam, Filler-Corns’s fellow Democrat? Let’s take a look.
The story begins in December 2017, when the Republican-led Congress passed, and President Donald Trump signed, sweeping permanent tax cuts for businesses and temporary reductions for households. Among its provisions, the law offers an incentive for many filers to take a newly-set standard deduction on their federal income tax returns instead of itemizing.
The standard deduction was nearly doubled, from $12,700 to $24,000 for married couples, and from $6,350 to $12,000 for individuals. In return, the law reduced popular itemized deductions for mortgage interest, and for paid state and local taxes. It eliminated deductions for moving expenses.
That put the federal income tax rules out of whack with Virginia laws, which sets the standard deduction at a much lower $3,000 for single filers and $6,000 for married couples filing jointly.
Virginia also requires all filers who itemized on their U.S. income tax returns to do likewise on their state returns, and those who take the federal standard deduction to also take Virginia’s standard deduction. As a result, an estimated 26 percent of Virginia filers - or 600,000 filers - could lose some of the benefits of the federal tax cut by by not being able to itemize in Virginia and seeing their state income tax bills rise. Their average increase would be $392 on this year’s returns, according to a study Northam commissioned last summer by Chainbridge Software, LLC in Fairfax County.
Chainbridge estimates that the federal tax changes will create a $1.2 billion windfall for state government during the next two budget years, starting July 1, 2019. How to use that money has become a major debate.
Northam and many Democratic legislators want to use $216 million to give a state tax income break to low-income households, and spend the rest on various initiatives, including raising teacher salaries and aiding local economic development.
Republicans, who narrowly control both chambers of the General Assembly, say Northam’s proposal is a non-starter. Many say it would unfairly transfer wealth from middle-class families to low-income households. GOP lawmakers are pushing a plan that would let Virginia filers itemize their state income taxes even if they took the standard deduction of their federal returns. That would allow a fair refund of the windfall to taxpayers, they say.
We asked Filler-Corn’s office to explain her contention that Northam’s budget doesn’t raise taxes. Adam Zuckerman, her senior advisor, answered in an email.
He wrote: "Delegate Filler-Corn's statement on the House floor that there is no tax increase in the governor's proposed budget is correct. Any tax change that will currently impact Virginians is as a result of the actions taken at the federal level last year. The current debate in the General Assembly is over how Virginia will respond to those federal actions and use any resulting excess revenue."
Filler-Corn said, "There is no tax increase in the governor’s budget plan." Any boosts state income tax bills, her senior advisor says, ripples from federal tax reform passed in 2017, not Gov. Northam’s proposals.
Because of those changes, Virginia’s income tax laws have fallen far out of sync with those of the U.S. government. Northam’s plan would keep the disparity intact and, as a result, 26 percent of Virginia filers would see their state income tax bills rise - by an average of $392. That would create a $1.2 billion state windfall over two years and Northam proposes spending most of it.
Filler-Corn’s explanation suggests the governor’s hands are tied. But Northam has had options. He could have recommended that Virginia laws be brought closer in conformity with federal tax code, ending the chance that any Virginian would pay pay a higher income tax. The governor chose otherwise.
As we’ve noted, it would not be an across-the-board tax hike; it would affect one of four Virginia filers. That slightly helps Filler-Corn. We rate her statement Mostly False.