Virginia’s standard deduction has increased under both Republican and Democratic governors in the last few years. It went from $6,000 per couple for 2018 to $17,000 for 2019. This allows taxpayers to save $633 a year. The Democrats, who control the Virginia Senate majority, may attempt to recover that $633 when they present their budget bill this Sunday. This would mean a significant tax increase for millions of Virginians.

The Senate Finance and Appropriations Committee deferred Tuesday action on three Republican measures that would have permanently made the $17,000 standard deduction. The standard deduction is set to expire in 2025. All the General Assembly needs to do to generate about $1 billion is to keep doing nothing.

Senate Democrats didn’t do anything when the Republican-sponsored legislation was being considered. The bills were “passed over for the day” and to pass them now would “significantly hamper our ability to build a budget,” stated Senator Creigh D. Deeds of Charlottesville. Mamie Locke (D-Hampton) said that we need to examine our entire tax system. She added, “Those who make more money should pay more.”

The standard deduction was clearly targeted, as it could fall from $17,000 to $6,000 for this couple next year if the extension is not approved. Taxes would also be applied to another $11,000 in income, costing taxpayers $632.50. This would reduce the take-home pay from paychecks. Undetermined numbers of low-income individuals who currently pay no taxes will start paying tax again.

In the House of Delegates the opposite is happening. The bill, sponsored by a senior Democrat, would not only keep the higher standard deduction but also increase it $1,500 for couples to $18,500. This would save another $86. The House bill passed a committee unanimously, but it will also be tangled in the House version of the budget for the state released on Sunday.

In 20 of the 30 states that offer a state standard deduction, it will be automatically increased with inflation starting in 2026. The House Bill 1754 was sponsored by Vivian Watts (D-Fairfax).

Virginia increased its standard deduction for income tax as soon as a federal tax bill passed in 2017 greatly expanded the amount that is tax-free under federal law. The federal standard deduction for 2025 will be $30,000. There could be up to $24,000 of income that is not taxed in the federal system but is fully taxed in Virginia. According to the House bill this gap would only be $11,500.

Virginia law states that if you take the standard deduction on your federal tax return, you have to do it again at the state-level. Around 85% of individual tax returns filed claim the standard deduction. This is a very equal tax break. A return with $50,000 in income has the same value as one reporting $500,000. It would be the lowest- and middle-income earners who would suffer the most if the tax break was removed.

If you like, it’s possible that the senators who are trying to cut the standard deduction to spark an increase in income taxes are playing “budget-poker”. The two legislative bodies create issues to be negotiated and thus provide bargaining chips. It’s also possible that their budget will spend all the dollars seized by the change. This would make it more difficult to save the standard deduction. They can also claim that they have never “voted” for a tax hike, since it’s a tax rise by default. Details will be revealed on Sunday.

The chairwoman promised a Senate-style tax relief. However, in recent years it has consisted of one-time rebates taken from surplus funds. A one-time refund cannot replace the standard deduction, which is built into law and applies every year. It allows taxpayers to plan for their finances.

Both the Democrats in control of the Assembly will have plenty of money to spend on their budgets. The Senate also killed the Governor Glenn Youngkin plan to give rebates to Virginians who pay a local vehicle tax. The Senate also killed Governor Glenn Youngkin’s plan to offer rebates to low- and middle-income Virginians paying a local car tax. This proposal was included in the budget. Its cancellation freed up over $1 billion that could be spent on other items. The Democrats were able to spend more money after Youngkin’s proposal was killed.

Youngkin, as well as his predecessor, Democrat Ralph Northam have both signed the series bills that increase the standard deduction for joint returns from $6,000 to 17,000 over five years. A member of Youngkin’s staff has indicated an openness to Watts’ bill, which would raise it to 18 500. Senators are playing games. It is impossible to abandon the bipartisan progress made.