Youngkin is near the mark on tax growth claim

Gov. Glenn Youngkin has been stressing that Virginia can afford the $1 billion in tax cuts he recently proposed.

"The overtaxation of Virginians is something we can address here and now because we have seen the government’s tax resource grow astronomically," Youngkin said Jan. 23 during a speech at the Weinstein Jewish Community Center in Richmond. "Receipts just in the last four years alone have grown 50%."

Virginia’s Republican governor made the same 50% tax growth claim in his State of the Commonwealth Address on Jan. 11. 

We fact-checked the governor’s claim and found it’s close to the mark. Youngkin wants to cut levies that go to Virginia’s general fund — which supports public education, public safety health programs and general government expenses. Those tax revenue grew by 45.2% during the past four budget years, according to state financial records.

Virginia collected $19.9 billion in general fund taxes for the fiscal year that ran from the start of July 2017 to the end of June 2018. It took in $28.9 billion for the budget year that ended in mid 2022. (Virginia’s fiscal year runs from July 1 to June 30.)

The general fund has three major money sources: personal income tax, corporate income tax and the sales tax. These account for 93% of the general fund’s tax receipts, and each revenue stream significantly grew during the last four years even as tax rates stood pat and Virginia’s population barely grew. 

Let’s take a look.

Personal income taxes are by far the largest source of general fund money, kicking in about two-thirds of the revenue. Their net revenue grew over the last four budget years (fiscal 2019, 2020, 2021, 2022) from $14.1 billion to $20.4 billion — a 44.7% increase. Nationally, state income tax receipts grew by an estimated 36.7% over the same span, data from the National Association of State Budget Officers shows. 

Virginia collects two types of income taxes. A withholding tax is the money held out of paychecks. A nonwithholding tax (also called a capital gains tax) is a levy on profits from selling personal assets such as stocks.

Net withholding tax collections rose from $10.6 billion to $13.6 billion during the last four budget years — a 28.3% increase. Much of the increase came from salary growth among upper income workers, according to a November 2022 report by the staff of the Virginia House Appropriations Committee. 

Gross non-withholding tax receipts rose from $3.5 billion to $6.8 billion — a 94.3% increase. The gain was caused mostly by people cashing in profits from the soaring stock market of the last four years.

Sales tax revenue increased from $3.5 billion to $4.6 billion over the last four budget years — a 31.4% increase. Much of the rise was caused by inflation and a heightened demand for goods during the COVID-19 crisis, said Anne Oman, staff director of the state’s House Appropriations Committee. Sales tax receipts in all states grew by about 30% during the span.

Corporate income tax collections rose from $862 million to $2 billion over the period — a 132% increase. Oman said uncertainty over inflation, recession and the economic effects of COVID caused many businesses to sit on profits instead of reinvesting them, creating greater corporate tax income. Corporate income tax revenue from all states  combined grew by an estimated 177% during the same four years. 

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Virginia’s burgeoning tax revenues have not been unique. States have quirks that make it impossible to exactly compare their total general fund tax receipts. What they have in common, however, is that income, sales, corporate taxes produce the vast majority of their proceeds. Virginia’s evenue from those three levies increased by 46.1% over the last four years, slightly higher than the estimated 44.2% rise seen by all states combined.

Youngkin’s $1 billion in tax cuts would come on top of nearly $4 billion in tax cuts that went into effect in the second half of 2022. The boon allowed Youngkin and the General Assembly to agree on a budget last year that also raised spending and lifted Virginia’s reserve funds to a record $2.6 billion.

But the gravy train began to slow in 2022’s latter half and is expected to continue to do so this year because of uncertainty about rising interest rates, the stock market and a possible recession, according to Virginia Secretary of Finance Stephen Cummings. 

Democrats have been skeptical about Youngkin’s proposed tax cuts this year, saying the money is needed to improve programs.

Youngkin said "Virginia tax receipts in just the last four years alone have grown 50%." State records show that general fund tax receipts have grown 45.2% over the last four budget years. So, Youngkin’s claim, although very credible, is a little high.

We rate Youngkin’s statement Mostly True. 

Correction, Jan. 25, 2023: This fact-check originally said PolitiFact Virginia made two attempts to contact Youngkin’s office and did not get a response. Our emails, it turns out, were mistakenly sent to a wrong web address. Our ruling is unchanged.