This article was reprinted with permission from Virginia Mercury.
On the cusp of his last full year in office, Gov. Glenn Youngkin on Wednesday unveiled a sweeping budget proposal that he hopes will define his legacy as Virginia’s 74th governor. Focused on tax cuts, infrastructure, education, and public health, the plan sets the stage for what could be a high-stakes 2025 legislative session as lawmakers weigh his ambitious priorities.
“We reopened Virginia’s economy after a global pandemic all while delivering surplus after surplus,” Youngkin said during a joint meeting of the General Assembly’s money committees in Richmond. “Virginia is growing, Virginia is leading, and Virginia is winning. And this morning I ask you to join me in continuing that work together.”
Youngkin emphasized the state’s strong economic performance, pointing to job growth, corporate investment, and robust revenue increases.
“The stock market is strong, and the Federal Reserve appears poised to reduce interest rates over the next year,” he said. “This backdrop further supports Virginia’s ongoing strong performance, with year-to-date revenues up 7.3% over 2024.”
Highlighting more than $5 billion in tax cuts already delivered to Virginians over the last three years, Youngkin proposed additional measures to lower the cost of living. “Together, the commonwealth can make a clear statement that reducing tax burdens so Virginians can keep more of their hard-earned money in their pockets is not a Republican idea, it’s not a Democrat idea, it’s just common sense,” he said.
A cornerstone in Youngkin’s proposed revisions to the two-year budget is a renewed push to eliminate the locally imposed personal car tax, an issue that he first came to embrace earlier this year after two Democrats campaigning for legislative seats in Southwest Virginia adopted it as part of their platforms.
The car tax has been a Republican rallying point since 1997, when GOP gubernatorial nominee Jim Gilmore successfully campaigned on repealing the unpopular levy. However, without a clear plan during the 2024 legislative session, the proposal quickly fizzled.
On Wednesday, Youngkin once again urged the General Assembly to abolish what he called Virginia’s “most hated tax since the tax on tea” that he said cost the average Virginia family of four about $290 annually.
“Standing here today, I will renew my call for us to work to fully eliminate the car tax, but recognizing that this might not be possible in this short session, there is an incremental step that we should take together to provide additional car tax relief,” Youngkin said.
Under the new proposal, the state would deposit $1.1 billion into a car tax credit fund to provide income tax rebates to nearly 1.9 million taxpayers earning up to $50,000 in adjusted gross income for individuals or $100,000 for couples filing jointly.
Eligible taxpayers would receive up to $150 for individual returns or $300 for joint returns annually for the next three years. After the fund is exhausted, the state would see a permanent reduction of $360 million in tax revenues each year.
Youngkin also is asking the legislature to extend the standard deductions for state income tax returns — currently set at $8,500 for individuals and $17,000 for joint filers — that are set to expire at the end of next year.
Failure to make the standard deduction permanent before Jan. 1, 2026, would result in tax increases of $57 million in fiscal year 2026 and $1.2 billion in fiscal year 2027, the governor said. “My friends, there is no reason to raise taxes on Virginians. We are running surplus after surplus after surplus.”
Democratic lawmakers responded cautiously to Youngkin’s budget plan Wednesday, emphasizing the need to review the details before committing to any initiatives. With the legislative session set to begin in January, both the House and Senate are preparing to roll out their own budget amendment proposals, signaling potential negotiations ahead.
“Our focus will remain on targeted investments that benefit all Virginians,” said House Appropriations Chair Del. Luke Torian, D-Prince William. “We will explore how we can work across the aisle to ensure K-12 schools are fully funded, higher education is accessible, and affordable housing becomes a reality for more families. These are areas where we can and should find common ground.”
House Speaker Don Scott, D-Portsmouth, in a statement thanked Youngkin for presenting his budget and for “initiating this important conversation.”
“Now, our responsibility is to evaluate these proposals thoughtfully and collaboratively to ensure they reflect the priorities of all Virginians. We can craft a budget that strengthens our schools, supports our communities, and provides real solutions for working families,” Scott said.
Other key initiatives in Youngkin’s proposed budget amendments:
‘No tax on tips’
The administration is also proposing to eliminate state taxes on tips for service industry workers, a policy similar to one championed by President-elect Donald Trump. If approved, the measure would allow tipped workers to claim a deduction on their state tax returns, with compliance monitored through IRS data and employer-reported W-2 forms. The proposal could benefit an estimated 250,000 Virginians.
“Virginia has an incredible hospitality, restaurant and service industry, and hardworking Virginians should keep every penny of the tips they earn through their exceptional service. My proposal is very simple — no more taxes on tips,” Youngkin said.
While the move is being framed as a win for workers, its broader implications remain unclear. Economists warn that some employers might exploit the policy by shifting more of a worker’s compensation to tips rather than wages, a concern also raised around similar federal legislation.
Education
Youngkin is proposing nearly $1 billion in new education funding, including a $50-million Virginia Opportunity Scholarship Program to provide $5,000 annual grants for private school expenses like tuition and transportation. About 10,000 K-12 students from families earning up to twice the federal poverty level would qualify, with funding coming from revenue growth, not existing education budgets.
The plan includes $25 million for lab school partnerships with historically Black colleges and universities and nearly $500 for higher education capital projects.
However, there is no new funding for college operating expenses, and Youngkin is pushing for a 2.5% cap on tuition increases. “It’s time for our colleges to cut administrative bloat and handle costs without asking taxpayers for more,” he said.
Additional proposals include $290 million for school construction, $550 million in direct aid, $6.8 million for school resource officers, and $50 million to support underperforming schools.
VMSDEP
The Virginia Military Survivors and Dependents Education Program (VMSDEP), which provides tuition waivers to spouses and children of military members killed or permanently disabled in service, would receive $60 million from a surplus in the state’s 529 college savings program to address a funding shortfall.
Lawmakers scrutinized the program last year after it was initially excluded from budget negotiations. Concerns over its sustainability arose as participation surged by nearly 350%, growing from about 1,400 participants in 2019 to about 6,400 in 2023.
The allocation would come without any new policy proposals.
Withholding funds to quash ‘sanctuary cities’
Youngkin further echored national Republican rhetoric by declaring that “every state has become a border state” as he unveiled plans to cut funding to localities that limit or refuse compliance with U.S. Customs and Immigration Enforcement (ICE).
The proposal aligns with a broader GOP push against “sanctuary city” policies, which vary but often involve local governments choosing not to inquire about immigration status or declining full cooperation with ICE.
But with Virginia’s legislature under Democratic control, this proposal is expected to face significant opposition during the upcoming budget negotiations.
Boosting maternal health outcomes
Youngkin and Democratic lawmakers are prioritizing maternal health in their legislative and budget proposals, increasing the chances that some measures will make it through budget negotiations.
Youngkin’s plan includes $2.5 million for perinatal health hubs, expanded funding for OB-GYN residencies, and a $500,000 education campaign to help parents recognize life threatening conditions like heart attacks or eclampsia.
He also proposes $1 million to support workforce development for midwives and doulas, both crucial professions in addressing care gaps and advocating for patients, particularly those of color impacted by racial health disparities.
Mental health support
As Virginia enters its third year of its Right Help, Right Now initiative, Youngkin’s latest budget request includes $35 million to improve crisis response involving law enforcement. The funding would support hiring special conservators of the peace, or “s-cops,” as Youngkin calls them.
These intermediaries would assist with individuals awaiting hospital admissions after mental health crises, aiming to de-escalate situations where people in crisis might unintentionally harm officers and face jail time. Youngkin envisions the “s-cops” fostering better outcomes for those in crisis while allowing law enforcement officers to focus on their regular duties.
Disaster relief
The administration proposes allocating $127 million toward a permanent disaster relief fund to aid victims of natural disasters beyond what the federal assistance, insurance and private donations cover.
Southwest Virginia has faced repeated flooding in recent years, most recently from Hurricane Helene in September, which claimed three lives and caused $4.4 billion in damage. Youngkin said $25 million could come from the general fund, with $102 million sourced from the latest round of revenues of the Regional Greenhouse Gas Initiative (RGGI).
Youngkin had previously sought to withdraw Virginia from RGGI, despite praise from environmental groups for its funding for flood resilience and energy efficiency programs. “I fully expect that the General Assembly will work constructively together in this next short session to appropriate funds specifically for Hurricane Helene relief,” he said on Wednesday.
Sen. Mamie Locke, D-Hampton, questioned the governor’s proposal, pointing to his approach of using RGGI revenues. “Why not just put us back in RGGI?” she asked, while noting uncertainty about the fund’s legislative support.
“Don’t know yet,” she said in an interview.
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