Virginia lawmakers weigh wide-ranging tax hikes

Household purchases, paychecks, transportation costs and everyday services could be impacted by a broad slate of tax increase proposals this session in the Virginia Legislature, even as the final shape of the state budget remains weeks away.

The proposals span multiple areas, including local sales taxes, expanded sales taxes on services, a new payroll tax to fund paid family and medical leave and higher income tax brackets for top earners.

While many measures remain in early stages, several are moving alongside budget negotiations in both chambers.

Steve Haner, a senior fellow at the Thomas Jefferson Institute for Public Policy, said a common feature of many proposals is that their impact would be felt gradually rather than through a single, highly visible tax increase.

“You’ll just notice the paycheck got a little smaller,” Haner said. “But over the course of the year, it’s a large amount of money.”

Local sales taxes

One proposal would allow counties and cities to seek voter approval for an additional 1% local sales tax. While a penny on the dollar may appear modest, Haner said it would apply broadly to everyday purchases, including restaurant meals, clothing and other retail goods.

Over time, he said, those incremental costs can add up for households, particularly in regions where combined state and local sales tax rates could rise as high as 8%.

Expanding sales taxes to services

Lawmakers are also weighing proposals that would extend the state’s sales tax to a wide range of consumer services that have historically been exempt, including car repairs, clothing alterations, pet care and delivery fees.

“More is being spent on services, and less is being spent on hard goods,” Haner said, adding that many everyday services have been exempt from Virginia’s sales tax since it was enacted in the 1960s.

Supporters say broadening the tax base reflects changes in how Virginians spend their money, while critics warn it would raise costs on everyday services that many households rely on regularly.

Payroll tax for paid family and medical leave

Another major proposal would create a statewide paid family and medical leave program funded through a payroll tax of roughly 1% of gross income, split between employees and employers. The tax would not take effect immediately if approved.

For a worker earning $30,000 a year, Haner said the cost would be about $300 annually. For someone earning $100,000, the amount would be closer to $1,000.

“It’s like insurance,” Haner said. “You pay for it, you may use it, you may not use it. But this is not a choice.”

Higher income taxes on top earners

Democratic lawmakers have also introduced bills that would create new income tax brackets for high earners, including rates of up to 10% for individuals earning $1 million or more annually.

While those proposals would generate significant revenue from a relatively small number of taxpayers, Haner questioned whether lawmakers would ultimately adopt them.

“A 10% tax on millionaires would convince some people it’s time to look at Florida or Texas,” he said.

What happens next

Despite the number of proposals under discussion, it remains unclear which measures will ultimately be included in the final budget.

The House and Senate are still negotiating spending plans, and tax decisions are typically finalized late in the session as budget talks narrow lawmakers’ options.