In the past few days, the Virginia Society of CPAs, of which I am a longstanding member, issued a white paper allegedly stating the position of its members regarding tax reform in Virginia. The purpose of this post is to provide "the rest of the story".
In December 2017, Congress passed the Federal Tax Cuts and Jobs Act. As you are aware, this is a complex bill - much of which still has not been fully vetted by the IRS. However, at the state level, if Virginia chooses to conform to this bill without enacting some tax reform measures, the state is projected to collect additional revenues of approximately $600 million annually.
There are many impacts to Virginia taxpayers as a result of the TCJA, but the most obvious is the issue regarding the standard deduction. Now that the standard deduction is higher at the federal level ($24,000 for married couples), many taxpayers will use the standard deduction. This will force them to use the state standard deduction which is only $6,000. So, if your itemized deductions would have been $20,000 without using the higher federal amount, you are essentially being taxed at the state level on an additional $14,000. This equals an annual tax increase of $460. There are other examples of increases, but this is the most obvious and the one that will hit the majority of people earning less than $100,000 annually.
The VSCPA white paper does not represent our position on this issue. The white paper suggests that the state should conform to the Federal changes without enacting tax reform and suggests that the state could enact tax reform in future years. Well, we all know what happens when you kick the can down the road...it just keeps rolling along.
The Commonwealth had a surplus of $550 million for the year that recently ended. The state does not need additional taxpayer dollars.
We believe that Virginia legislators must do what the rest of us taxpayers (and CPAs) are foced to do: deal with it. This is an ideal time to have meaningful discussions in the General Assembly to improve and simplify the tax collection process. It is not a time for a back door tax increase.