Virginia Republican gubernatorial candidate Ed Gillespie is proposing what he bills as the commonwealth’s first income tax cuts in decades, releasing a plan Thursday that calls for redirecting future state revenues for modest decreases in tax rates.
Gillespie’s proposal would phase in an across-the-board 10 percent decrease in tax rates, if the state’s economy grows as projected over the next five years. At the highest level, Virginians would pay a 5.15 percent tax instead of 5.75 percent on income above $17,000.
His campaign says this would translate to annual savings of almost $1,300 for a family of four and reduce state tax revenues by $1.3 billion when fully phased in.
The state estimates revenues will grow by $3.4 billion over the next five years. Gillespie wants to send $1.3 billion, or about 40 percent, of that money back to taxpayers while using $2 billion for new investments in education, health care, transportation, public safety and other services. He is also proposing cuts to “wasteful spending” and “special interest tax preferences” to help fund the cuts, but did not provide details.
“It would provide some much needed relief for workers who are having a hard time making ends meet,” said Gillespie, a longtime Republican strategist who nearly unseated U.S. Sen. Mark Warner (D) in 2014.
Details would have to be worked out by the General Assembly, currently controlled by Republicans. Gillespie is also calling on the legislature to make it easier for local governments to restructure how they tax businesses.
Del. Kirk Cox (R-Colonial Heights), set to lead the House chamber next year, endorsed Gillespie’s plan. The Republican legislature broke with anti-tax orthodoxy in 2013 to increase sales taxes and restructure gas taxes to raise revenue for transportation.
At a Thursday appearance in Loudoun County, Gillespie said his tax plan would help ease the potential “strain” on Virginia from President Trump’s proposed budget that would drastically cut federal spending in a state that has long been dependent on government and military spending.
“My plan will allow for entrepreneurs and innovators to flourish in Virginia, for small businesses to open and grow, and that will take us to an economy that is less impacted by changes at the federal level,” said Gillespie.
His opponents in the June 13 Republican primary tore into his proposal.
In a lengthy statement, state Sen. Frank Wagner, a longtime state lawmaker from Virginia Beach and key negotiator of the 2013 transportation revenue overhaul, called Gillespie’s proposal a “lazy political stunt” and emblematic of a “D.C.-insider” unfamiliar with state government.
Wagner said conservatives have long wanted to cut the income tax, but have not because it’s a crucial revenue stream that keeps the budget balanced even during economic downturns. He said it was “intellectually dishonest” for Gillespie to base a plan on revenue projections that don’t take into account looming federal overhauls of health care and spending.
The third Republican gubernatorial candidate Corey A. Stewart, the chair of the Prince William Board of County Supervisors, criticized Gillespie’s plan as a “consultant-driven” and “convoluted” proposal that doesn’t go far enough.
He wants to reduce the top tax rate by a full percentage point and eliminate taxes for income below $17,000, saying he will balance the budget by capping Medicaid spending to a fifth of the state budget and requiring all state agencies to propose plans to cut expenditures.
A fourth Republican candidate, Denver Riggleman, announced on Thursday he would drop out of the race.
The two Democratic gubernatorial candidates also panned Gillespie’s tax proposal.
Former Congressman Tom Perriello took to Twitter to criticize the proposal for helping the wealthy save far more money than minimum wage workers. He has said he’d release his own tax proposal in April.
A spokesman for Lt. Gov. Ralph Northam blasted Gillespie’s proposal as a “Trump-esque” plan devised with the help of a conservative policy center that also praised Texas Sen. Ted Cruz’s proposals for tax credits during his failed presidential bid. The spokesman said Northam believes Virginia’s tax code can be more predictable to encourage small business growth, but did not specify how.
Dalton Bennett contributed to this report.