(The Center Square) – With the Virginia legislative session just two months away, the state’s general revenue collections were above forecasts again in the month of October, according to the office of the secretary of finance.
“Wage growth and price inflation have supported tax collections so far this year.” Secretary of Finance Stephen Cummings said in a statement. “However, changing economic conditions and Fed policy are heightening our concerns about growth in the second half of the fiscal year. Aggressive actions by the Federal Reserve to halt inflation are likely to result in an economic downturn that significantly [impacts] tax revenues.”
The general revenue collections exceeded forecasts by about 10.3% on a year-over-year basis, according to a news release from the governor’s office. The October revenue numbers reflect about $88 million in rebates for taxpayers, which was included in the budget. After adjusting for these reductions, general fund revenues were up by 8.3% over the first four months of the first fiscal year.
“With the impacts of planned policy actions, including the historic tax rebates of nearly $900 million recently delivered to Virginians, October revenue collection increased more than 10 percent compared to a year ago,” Gov. Glenn Youngkin said in a statement. “Recent economic data remains mixed and we’re closely monitoring consumer indicators like sales and use revenues whose upward trends are unlikely to continue long-term. The impact of sustained inflation and misguided actions out of Washington have undermined consumer confidence and employment growth nationally.”
As the legislative session is approaching, lawmakers will need to decide how to manage unanticipated funds. Stephen Haner, a senior fellow for state and local tax policy at the free-market Thomas Jefferson Institute, told The Center Square that lawmakers should work on reducing the impact of inflation.
“Tax increases would be ridiculous, but some legislators will probably try,” Haner said. “Every effort should be made to reduce the impact of inflation on taxpayers, and some form of inflation indexing is the best approach. Adjust the deductions and tax brackets for past inflation, and make future adjustments automatic.”
In the biennial budget passed earlier this year, the governor worked with House and Senate leadership to approve a variety of tax cuts. However, the governor did not secure all of his tax cuts proposals, some of which were blocked by Senate Democratic leadership. He has indicated that he will continue working to cut taxes. The House of Delegates is narrowly controlled by Republicans and the Senate is narrowly controlled by Democrats.
In addition to revenue increases, the state’s employment has also gone up year-over-year. There were 123,000 more people employed, which is a 3% increase.
