House of Delegates passes package to ensure $950 million in tax relief for middle-class taxpayers

The Virginia House of Delegates passed a package of legislation Tuesday to guarantee at least $950 million in tax relief. Legislation carried by Delegate Tim Hugo (HB2529) and Delegate Chris Jones (HB2533) works in tandem to ensure that all additional individual tax revenue from the Tax Cuts and Jobs Act is set aside in a Taxpayer Relief Fund and used to provide tax relief for those affected by federal and state tax law changes. The conformity legislation passed Tuesday without an emergency clause after 34 Democrats opposed the creation of a Taxpayer Relief Fund on Monday.

“Since we rolled out our tax relief plan last month, Republicans in the House of Delegates have been unified in our efforts to use increased revenues from the federal tax law changes to provide tax relief to middle-class taxpayers,” said House Speaker Kirk Cox (R-Colonial Heights). “Our plan guarantees that all money from the federal tax law changes are put in a lockbox and returned to taxpayers. I appreciate Chairman Ware, Chairman Hugo, and Chairman Jones for their leadership on this important issue.”

House Bill 2533 conforms state tax law to federal tax law after the passage of the Tax Cuts and Jobs Act, but without an emergency clause. On Monday, 34 Democrats opposed the legislation with an emergency clause, denying the 80 votes necessary for passage. On Tuesday, 32 Democrats opposed the legislation without an emergency clause. Without conformity legislation, Virginia taxpayers will have to make up to 50 modifications to their tax filings and the state tax department will not be able to process refunds. The legislation becomes effective July 1, after tax season is over.

“The House budget does not spend revenues from the Tax Cuts and Jobs Act and this legislation guarantees that revenue from the individual provisions will be placed in the Taxpayer Relief Fund,” said House Appropriations Committee Chairman S. Chris Jones (R-Suffolk). “Virginians would be far better off if the House could adopt this legislation with an emergency clause, but unfortunately some of our colleagues are preventing that. The tax filing season will be significantly disrupted.”

House Bill 2529 allows taxpayers to itemize their state taxes regardless of how they file their federal return. This will allow middle-class families to receive the maximum amount of tax relief at the federal and state level. This will protect over 600,000 middle-class tax filers from a hidden tax increase. The proposal will also increases the state standard deduction from $3,000 to $4,000 for an individual and from $6,000 to $8,000 for a married couple. This will provide broad tax relief for 2.7 million Virginians who claim the standard deduction. This plan will fully implement the federal tax cuts at the state level, protecting a middle class family that itemizes from what could be an $805 tax increase or providing an additional $115 in tax relief to a family that chooses the standard deduction.

“This legislation is the most significant tax relief legislation to pass the House of Delegates in 15 years,” said House Republican Caucus Chairman Tim Hugo (R-Fairfax). “Our proposal keeps more money in the pockets of Virginians without costing the state one penny. Even after providing this tax relief, the state will have more money for teachers, transportation and other key services than it did last year. Our plan says “no” to a tax hike on the middle class and “yes” to cutting taxes for all Virginians. I appreciate the work of Chairman Ware, as well as my co-patrons, on this legislation.”

House Bill 2529 (Hugo) Background

  • House Bill 2529 is designed to address the state issues related to the Tax Cuts and Jobs Act, prevent a hidden tax increase and provide middle-class tax relief for working Virginians.
  • The substitute has three main components:
  • Allows people to itemize regardless of how they pay their federal taxes
  • Increases the standard deduction by $1,000 ($3k to $4k) for an individual and $2,000 ($6k to $8k) for a married couple.
  • Leaves current law in place for state and local taxes, instead of capping them at $10,000
  • This bill would provide about $575 million in tax relief, beginning in the next fiscal year. But even after this tax relief, the state would still take in more revenue in FY20 than it did in FY19 – by $37 million.
  • By allowing people to continue to itemize, we ensure people are not hit with a hidden tax increase. For a married couple of homeowners each making $55,000 per year, this provision would prevent about an $800 tax increase.
  • By raising the standard deduction, we are providing tax relief to anyone who claims the standard deduction, but mostly for low and middle-income Virginians. This will provide a married couple $115 in tax relief.
  • By maintaining the current rules on SALT, we protect homeowners from getting hit with a second tax increase at the state level. The federal law caps deductions at $10,000 – a major issue in Northern Virginia.
  • HB2529 is a prospective, policy bill. This bill deals only with tax year 2019 and beyond, and seeks to provide middle-class tax relief.
  • HB2529 bill does not address the 2018 tax year. That revenue, approximately $375 million, is set aside in the Taxpayer Relief Fund by the conformity bill. HB2529 did not address this out of simplicity. The hope would be to use this $400 million to make whole taxpayers, particularly itemizers, who get hit in tax year 2018.

House Bill 2355 (Jones) Background

  • House Bill 2529 moves Virginia’s fixed-date conformity with the federal tax code to December 31, 2019 and captures all additional revenues resulting from changes to individual income tax provisions in the “Taxpayer Relief Fund.”
  • The plan would capture $952 million into the “Taxpayer Relief Fund,” which represents 100% of the limited-time individual provisions of the Tax Cuts and Jobs Act.
  • The legislation also includes an enactment clause to require the Department of Tax to develop a plan by August 1, 2019 to refund revenues in the fund to taxpayers.

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