Bacon's Rebellion

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Is Virginia a Low Tax State? It Depends on What You Measure.

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by

James A. Bacon
in , ,

Source: Virginia Compared to Other States, State & Local Tax Revenue

by James A. Bacon

The Joint Legislative Audit & Review Commission has updated its scoreboard comparing Virginia on key metrics to other states — a project championed by Sen. Tim Kaine when he was governor. The idea was to allow Virginians to track the progress of the commonwealth in comparison to peer states on the basis of metrics of spending, taxes, and social well being.

There’s a lot to explore in this database, and I’ll highlight other metrics in future posts. But today, let’s focus on state and local taxes per capita — the most important measure of the size and scope of government. (It is an incomplete measure, to be sure; it does not include indirect levies such as high electric rates to advance green energy goals, but it’s what we have.)

Bottom line: Virginia, once considered a low tax state, has moved into the top 50%. As of Fiscal Year 2018, the most recent date for which JLARC collected data, Virginia ranked 24th in the country at $4,994 per capita in state and local tax collections. But there is another way to spin the data…

Source: Virginia Compared to Other States, State & Local revenue as % of personal income

If you calculate state and local taxes as a percentage of income, the picture looks very different. State and local taxes in 2017 consumed 17.7% of Virginians’ income in fiscal 2018. That was the second lowest in the nation. And it was darn close to the lowest. New Hampshire squeaked under Virginia with a 17.5% state/local claim. Florida, the third lowest in the county grabbed 18.5% — almost a full percent point more.

In New York, by contrast, state and local taxes consumed 29.1% of income. The California grab was 26%. (The comparable numbers were even higher for some states which benefit from energy levies that don’t impact residents directly, making state-to-state comparisons tricky.)

In theory, a higher tax rate is a worthwhile if government provides a higher level of public services — better roads, schools, law enforcement, higher-education, and health care. Conversely, a low tax rate may be no bargain if public services stink. Does Virginia deliver a good balance of taxes versus public services? Answering that question will require looking at other metrics…. and follow-up posts.

(Hat tip: Jim Weigand)

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65 responses to “Is Virginia a Low Tax State? It Depends on What You Measure.”

  1. Nancy_Naive Avatar
    Nancy_Naive

    “In theory, a higher tax rate is a worthwhile if government provides a higher level of public services. …. Conversely, a low tax rate may be no bargain if public services stink.”

    There is also value in just being left alone.

    My only complaint about taxes is the under-withholding threshold on income taxes. If I recall it’s somewhere around $100. That’s tight. While I don’t mind paying interest on any under payment, the form 2210 is somebody’s idea of a joke. The one time I was forced to fill one out, it took over an hour to discover I owed $29.36.

    Just stroke ’em a check for 111% of this year’s tax as the first and one-time estimated payment of next year’s taxes. Money in the bank.

    1. LarrytheG Avatar
      LarrytheG

      well there is that pesky issue of whether or not the “higher level of services” is benefiting you or not.

      1. Nancy_Naive Avatar
        Nancy_Naive

        If they leave me alone… yes.

        Look, the only contact I have with the State is the DMV. Fine service for the tax dollar.

  2. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    The many commenters on this blog who complain about Virginia being such a high tax state and becoming like New Jersey are noticeably silent.

    1. James A. Bacon Avatar
      James A. Bacon

      I guess I’m one of those complainers!

      Don’t forget, Dick, the data goes only through FY 2018. Like Steve says, I strongly suspect we’ll see a market move upwards in more recent years — to say nothing of the years to come.

      1. LarrytheG Avatar
        LarrytheG

        In other words… there’s almost surely a boogeyman involved… we just need to wait to see what develops…

        😉

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        Some were making those complaints in January 2019 when I started on this blog. This data obviously undermines those complaints.

    2. Steve Haner Avatar
      Steve Haner

      Uh, mine was the first response, and in a calm tone the message was “You ain’t seen nothing yet.” Virginia will continue to climb that list. Both House and Senate Finance chairs are pushing for a tax study focused I suspect on a higher marginal income tax rate in upper brackets, which will address that result about “taxes as a share of personal income.” A post I have yet to write….

      And Larry, not so sure about “VA doesn’t tax social security income.” This will be my first return showing that for us, and as I recall some of those age-related benefits are means tested and disappear quite quickly if you have pensions, other income, etc.

      1. LarrytheG Avatar
        LarrytheG

        Is Social Security taxable in Virginia?
        The state of Virginia exempts all Social Security income from taxation. Some Social Security retirement benefits may still be taxed at the federal level, however.

        1. idiocracy Avatar
          idiocracy

          Quite frankly, if you need to be concerned about whether or not Virginia taxes social security income, you should have done a better job of planning for your retirement.

  3. Steve Haner Avatar
    Steve Haner

    Oh, give it some time. Plenty of changes since those figures were valid. The 2019 GA session allowed Virginia to reap most of the TCJA windfall. Numerous changes in taxes in 2020, state and local. The trend line is clear. Small sections of Virginia (guess where) put the personal income so high and I have never given that “as a percentage of income” measure much value.

    1. LarrytheG Avatar
      LarrytheG

      The “bite” for low income and middle income seniors is relatively low in Virginia.

      12K /24k from the Fed AdjG right off the bat for seniors and social security not taxed.

  4. Steve Haner Avatar
    Steve Haner

    Oh, give it some time. Plenty of changes since those figures were valid. The 2019 GA session allowed Virginia to reap most of the TCJA windfall. Numerous changes in taxes in 2020, state and local. The trend line is clear. Small sections of Virginia (guess where) put the personal income so high and I have never given that “as a percentage of income” measure much value.

    1. LarrytheG Avatar
      LarrytheG

      The “bite” for low income and middle income seniors is relatively low in Virginia.

      12K /24k from the Fed AdjG right off the bat for seniors and social security not taxed.

      1. Nancy_Naive Avatar
        Nancy_Naive

        “In theory, a higher tax rate is a worthwhile if government provides a higher level of public services. …. Conversely, a low tax rate may be no bargain if public services stink.”

        There is also value in just being left alone.

        My only complaint about taxes is the under-withholding threshold on income taxes. If I recall it’s somewhere around $100. That’s tight. While I don’t mind paying interest on any under payment, the form 2210 is somebody’s idea of a joke. The one time I was forced to fill one out, it took over an hour to discover I owed $29.36.

        Just stroke ’em a check for 111% of this year’s tax as the first and one-time estimated payment of next year’s taxes. Money in the bank.

  5. Nancy_Naive Avatar
    Nancy_Naive

    “In theory, a higher tax rate is a worthwhile if government provides a higher level of public services. …. Conversely, a low tax rate may be no bargain if public services stink.”

    There is also value in just being left alone.

    My only complaint about taxes is the under-withholding threshold on income taxes. If I recall it’s somewhere around $100. That’s tight. While I don’t mind paying interest on any under payment, the form 2210 is somebody’s idea of a joke. The one time I was forced to fill one out, it took over an hour to discover I owed $29.36.

    Just stroke ’em a check for 111% of this year’s tax as the first and one-time estimated payment of next year’s taxes. Money in the bank.

    1. LarrytheG Avatar
      LarrytheG

      well there is that pesky issue of whether or not the “higher level of services” is benefiting you or not.

      1. Nancy_Naive Avatar
        Nancy_Naive

        If they leave me alone… yes.

        Look, the only contact I have with the State is the DMV. Fine service for the tax dollar.

  6. wpeabody.fcta Avatar
    wpeabody.fcta

    NC,SC, and FL are eating VA’s lunch. See IRS data at howmoneywalks.com

  7. wpeabody.fcta Avatar
    wpeabody.fcta

    NC,SC, and FL are eating VA’s lunch. See IRS data at howmoneywalks.com

  8. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    The many commenters on this blog who complain about Virginia being such a high tax state and becoming like New Jersey are noticeably silent.

    1. James A. Bacon Avatar
      James A. Bacon

      I guess I’m one of those complainers!

      Don’t forget, Dick, the data goes only through FY 2018. Like Steve says, I strongly suspect we’ll see a market move upwards in more recent years — to say nothing of the years to come.

      1. LarrytheG Avatar
        LarrytheG

        In other words… there’s almost surely a boogeyman involved… we just need to wait to see what develops…

        😉

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        Some were making those complaints in January 2019 when I started on this blog. This data obviously undermines those complaints.

    2. Steve Haner Avatar
      Steve Haner

      Uh, mine was the first response, and in a calm tone the message was “You ain’t seen nothing yet.” Virginia will continue to climb that list. Both House and Senate Finance chairs are pushing for a tax study focused I suspect on a higher marginal income tax rate in upper brackets, which will address that result about “taxes as a share of personal income.” A post I have yet to write….

      And Larry, not so sure about “VA doesn’t tax social security income.” This will be my first return showing that for us, and as I recall some of those age-related benefits are means tested and disappear quite quickly if you have pensions, other income, etc.

      1. LarrytheG Avatar
        LarrytheG

        Is Social Security taxable in Virginia?
        The state of Virginia exempts all Social Security income from taxation. Some Social Security retirement benefits may still be taxed at the federal level, however.

        1. idiocracy Avatar
          idiocracy

          Quite frankly, if you need to be concerned about whether or not Virginia taxes social security income, you should have done a better job of planning for your retirement.

  9. TBill Avatar
    TBill

    First of all, I would ask if they are including all tax especailly including car tax.

    I look at Virginia as a bifurcated state with high taxes in NoVa and low taxes rural. So I would like to see some NoVA metrics vs. CA, NJ, NY.

    The other thing I would look at is middle income say $90,000-$200,000. Virginia is very friendly to lower incomes, and semi-friendly to the wealthy. It’s the middle folks that are crushed harder here.

    1. LarrytheG Avatar
      LarrytheG

      I wonder the same. Our “car tax” is outrageous… it’s like $6.55 per hundred. Think of that for a new car valued at 20K.

      And as far as I can tell, not a penny is spent on roads and transportation.

      1. idiocracy Avatar
        idiocracy

        “And as far as I can tell, not a penny is spent on roads and transportation.”

        You have paved roads. What more do you want???!!?

        1. Nancy_Naive Avatar
          Nancy_Naive

          Fully paved? Not all roads paved, just the ones that have some paving should have complete paving.

          1. LarrytheG Avatar
            LarrytheG

            We still have some dirt subdivision roads that were done before the county required they be built to state specs.

            But, like many, counties, we have a slew of “paved” Byrd-era secondary roads that are designed for 1930 cars and traffic.

            Folks actually move down here from NoVa and want a “country” place out in the “woods”.. they buy their lot and house then immediately start complaining about the safety of the roads and lack of internet… go figure….

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        How much of that $6.55 is offset by the state? Remember, the state reimburses localities almost a $1 billion a year for “lost” car tax revenues.

        1. LarrytheG Avatar
          LarrytheG

          Looks like this for a 2017 compact pickup – half year:

          tax tax relief tax owed
          448.67 117.90 330.77

    2. idiocracy Avatar
      idiocracy

      Also, a salary of $90k in NoVA is like a salary of $60k elsewhere in the country. Anyone who really wants to know just how much more expensive NoVA is can look at how much more the FedGov pays workers in NoVA than they do elsewhere in the country.

      1. Matt Adams Avatar
        Matt Adams

        I do not miss living there at all. Not to mention the Fairfax PPT which was a single payment (the other locals in VA I’ve now lived it was two) and it was due is December.

        1. idiocracy Avatar
          idiocracy

          NoVA is a Potemkin Village. Looks nice with a superficial glance, but live here for a while and, well, it’s obvious why most people leave the first chance they get.

          1. LarrytheG Avatar
            LarrytheG

            I dunno… looks like you still have about 2 million hold-outs.

            😉

            and the MSA for the Va-Dc-Md region is 6 million.

            purgatory for sure… but no shortage of participants.

          2. idiocracy Avatar
            idiocracy

            There’s always a greater fool.

          3. LarrytheG Avatar
            LarrytheG

            and what could be even worse than actually living in NoVa?

            Why commuting 100 miles a day from the exurbs to work there!!

            Down Fredericksburg way, we have 350K total population and about 80K or so commute to NoVa for their work which makes a real mess of I-95.

            AND they are a demanding LOT. They want all the amenities that NoVa has and a tax rate to support it! The schmoos who grew up and live here and work locally make 1/2 what the NoVa commuters make…

          4. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            My daughter and her family have been there for more than 20 years. They live in Fairfax County near Vienna and are very content there. Many of their friends are also long-term residents of the area. My son-in-law is about 15-20 minutes away from his office. He could ride his bicycle on the Bike Trail to his office if he wanted to.

          5. Matt Adams Avatar
            Matt Adams

            “Dick Hall-Sizemore | February 1, 2021 at 10:26 am |
            My daughter and her family have been there for more than 20 years. They live in Fairfax County near Vienna and are very content there. Many of their friends are also long-term residents of the area. My son-in-law is about 15-20 minutes away from his office. He could ride his bicycle on the Bike Trail to his office if he wanted to.”

            Mr. Hall-Sizemore,

            The key there is the 20 year installment. If they were able to get in prior to everything blowing up “prices” included kudos to them.

            When I first moved in 2013 I was 16.4 miles from my office in Arlington. It was roughly 18 miles once lovely day that took me 2.5 hours.

          6. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            I am well aware of the price of housing in NoVa. I would be tempted to move there now that I am retired, but I couldn’t afford a house, or even a townhouse, near them. They bought the house they are now in about ten years ago and I thought the price was outrageous then. I assume that its value has gone up, but I don’t know how much.

        2. idiocracy Avatar
          idiocracy

          Don’t forget all of the blue collar service sector employees in NoVA that generally live 15 to a house, generally in places like Manassas, Woodbridge, Herndon, Sterling (likely not anywhere that your relatives live, Mr. Hall-Sizemore) to make ends meet.

          1. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            There appears to be several families living in one of the houses next to my daughter’s.

  10. TBill Avatar
    TBill

    First of all, I would ask if they are including all tax especailly including car tax.

    I look at Virginia as a bifurcated state with high taxes in NoVa and low taxes rural. So I would like to see some NoVA metrics vs. CA, NJ, NY.

    The other thing I would look at is middle income say $90,000-$200,000. Virginia is very friendly to lower incomes, and semi-friendly to the wealthy. It’s the middle folks that are crushed harder here.

    1. LarrytheG Avatar
      LarrytheG

      I wonder the same. Our “car tax” is outrageous… it’s like $6.55 per hundred. Think of that for a new car valued at 20K.

      And as far as I can tell, not a penny is spent on roads and transportation.

      1. idiocracy Avatar
        idiocracy

        “And as far as I can tell, not a penny is spent on roads and transportation.”

        You have paved roads. What more do you want???!!?

        1. Nancy_Naive Avatar
          Nancy_Naive

          Fully paved? Not all roads paved, just the ones that have some paving should have complete paving.

          1. LarrytheG Avatar
            LarrytheG

            We still have some dirt subdivision roads that were done before the county required they be built to state specs.

            But, like many, counties, we have a slew of “paved” Byrd-era secondary roads that are designed for 1930 cars and traffic.

            Folks actually move down here from NoVa and want a “country” place out in the “woods”.. they buy their lot and house then immediately start complaining about the safety of the roads and lack of internet… go figure….

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        How much of that $6.55 is offset by the state? Remember, the state reimburses localities almost a $1 billion a year for “lost” car tax revenues.

        1. LarrytheG Avatar
          LarrytheG

          Looks like this for a 2017 compact pickup – half year:

          tax tax relief tax owed
          448.67 117.90 330.77

    2. idiocracy Avatar
      idiocracy

      Also, a salary of $90k in NoVA is like a salary of $60k elsewhere in the country. Anyone who really wants to know just how much more expensive NoVA is can look at how much more the FedGov pays workers in NoVA than they do elsewhere in the country.

      1. Matt Adams Avatar
        Matt Adams

        I do not miss living there at all. Not to mention the Fairfax PPT which was a single payment (the other locals in VA I’ve now lived it was two) and it was due is December.

        1. idiocracy Avatar
          idiocracy

          NoVA is a Potemkin Village. Looks nice with a superficial glance, but live here for a while and, well, it’s obvious why most people leave the first chance they get.

          1. LarrytheG Avatar
            LarrytheG

            I dunno… looks like you still have about 2 million hold-outs.

            😉

            and the MSA for the Va-Dc-Md region is 6 million.

            purgatory for sure… but no shortage of participants.

          2. idiocracy Avatar
            idiocracy

            There’s always a greater fool.

          3. LarrytheG Avatar
            LarrytheG

            and what could be even worse than actually living in NoVa?

            Why commuting 100 miles a day from the exurbs to work there!!

            Down Fredericksburg way, we have 350K total population and about 80K or so commute to NoVa for their work which makes a real mess of I-95.

            AND they are a demanding LOT. They want all the amenities that NoVa has and a tax rate to support it! The schmoos who grew up and live here and work locally make 1/2 what the NoVa commuters make…

          4. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            My daughter and her family have been there for more than 20 years. They live in Fairfax County near Vienna and are very content there. Many of their friends are also long-term residents of the area. My son-in-law is about 15-20 minutes away from his office. He could ride his bicycle on the Bike Trail to his office if he wanted to.

          5. Matt Adams Avatar
            Matt Adams

            “Dick Hall-Sizemore | February 1, 2021 at 10:26 am |
            My daughter and her family have been there for more than 20 years. They live in Fairfax County near Vienna and are very content there. Many of their friends are also long-term residents of the area. My son-in-law is about 15-20 minutes away from his office. He could ride his bicycle on the Bike Trail to his office if he wanted to.”

            Mr. Hall-Sizemore,

            The key there is the 20 year installment. If they were able to get in prior to everything blowing up “prices” included kudos to them.

            When I first moved in 2013 I was 16.4 miles from my office in Arlington. It was roughly 18 miles once lovely day that took me 2.5 hours.

          6. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            I am well aware of the price of housing in NoVa. I would be tempted to move there now that I am retired, but I couldn’t afford a house, or even a townhouse, near them. They bought the house they are now in about ten years ago and I thought the price was outrageous then. I assume that its value has gone up, but I don’t know how much.

        2. idiocracy Avatar
          idiocracy

          Don’t forget all of the blue collar service sector employees in NoVA that generally live 15 to a house, generally in places like Manassas, Woodbridge, Herndon, Sterling (likely not anywhere that your relatives live, Mr. Hall-Sizemore) to make ends meet.

          1. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            There appears to be several families living in one of the houses next to my daughter’s.

  11. James Wyatt Whitehead V Avatar
    James Wyatt Whitehead V

    I can see why so many head for Florida. I wonder what is going on in North Dakota and South Dakota? One is high tax and the other is not. New Mason Dixon line maybe.

  12. James Wyatt Whitehead V Avatar
    James Wyatt Whitehead V

    I can see why so many head for Florida. I wonder what is going on in North Dakota and South Dakota? One is high tax and the other is not. New Mason Dixon line maybe.

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