Virginia tax rebates on the way; state revenues up, but so is inflation | Govt-and-politics

Virginia taxpayers will begin receiving one-time tax rebates next week, either directly to their bank accounts or through the mail.

The Department of Taxation expects to issue a total of 3.2 million rebates by the end of the year, with 2.9 million of them due to arrive by mid-October under a Oct. 17 deadline for taxpayers who filed their returns before July 1. The department will begin issuing the rebates Monday.

Individual taxpayers will receive up to $250, and couples filing jointly will receive $500 under the plan that newly elected Gov. Glenn Youngkin pushed and outgoing Gov. Ralph Northam included in his budget proposal last year.

Some payments may be reduced for taxpayers who have other state liabilities that state law requires them to pay back first. The last time the state sent rebate checks to taxpayers, in 2019, about 900,000 filers were ineligible — the law requires that taxpayers paid at least as much as they would receive — and for 300,000, the checks were reduced or fully offset by other outstanding debts .

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The pending tax rebate wasn’t the only good news for the House Appropriations Committee on Tuesday.

The Youngkin administration reported that state revenues rose by almost $224 million in August compared with the same month a year ago, or 5.3% after adjusting for an extra payroll deposit day.

State lawmakers were encouraged by the continued growth in state revenues — especially in payroll income taxes that reflect new jobs and higher wages.

“Maybe we’ll have a little bit of a soft landing,” House Appropriations Chairman Barry Knight, R-Virginia Beach, told Secretary of Finance Steve Cummings.

Knight said he is also encouraged that the continuing decline in gasoline prices has moderated the rise in inflation for other goods and services. “It looks like inflation isn’t rising as fast as we thought it might be,” he said.

The Bureau of Labor Statistics reported on Tuesday that inflation rose 0.1% in August compared to July, when it was flat from the previous month. However, prices were 8.3% higher in August than the same month a year ago after peaking at 9.1% higher in June and subsiding to 8.5% in July.

The average price of regular unleaded gasoline fell below $3.50 a gallon in Virginia to $3.47 a gallon on Monday after peaking in mid-June at $4.86 a gallon, according to AAA Mid-Atlantic. The average price was $3.38 a gallon in the Richmond area, down 31 cents a gallon from a month ago but still 43 cents a gallon higher than a year ago.

However, Cummings said housing prices remain high despite a continuing decline in home sales, and a 20% drop in state tax revenue from deeds and other court filings in August compared with the same month a year ago. The median home price was $385,000 in July, or 25% higher than three years ago, before the COVID-19 pandemic began.

For Virginia taxpayers, the one-time rebates are the most immediate form of relief in a $4 billion package of tax cuts in a pair of state budgets the General Assembly approved and Youngkin signed in June.

The budgets also include a nearly 80% increase in the standard deduction that Virginians will be able to claim on their next income tax return; the repeal of the 1.5% state sales tax on groceries; an income tax exemption on a portion of military retirement income; and a refundable earned income tax credit that will provide additional rebates to working low-income families.

The package does not include a temporary freeze on the state’s gasoline tax that Youngkin had advocated, along with a cap on future increases for inflation. The Virginia Senate, which Democrats narrowly control, rejected the governor’s gas tax cut proposals three times, asserting they were unlikely to lower prices significantly at the pump.

The tax department is bracing for a surge in calls from taxpayers about their eligibility for the one-time rebates. In 2019, its customer service center received 60,000 calls, so Tax Commissioner Craig Burns said the department has hired a contractor to answer calls about the rebates this year.

Burns said taxpayers will be able to contact the department either online or by telephone using their Social Security number and ZIP code to determine eligibility for the rebate, the amount they will receive and when they can expect to get it.

The department has dedicated a webpage to the rebate program at www.tax.virginia.gov/rebate.

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