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RICHMOND – The partial repeal of the state’s 2.5% grocery tax was one of Gov. Glenn Youngkin’s signature bipartisan accomplishments last year, but on Wednesday Senate Democrats refused to hand him another victory by rejecting a proposal that sought to eliminate the tax entirely.
By a 12-4 vote, the Senate Finance and Appropriations Committee effectively killed Senate Bill 850, sponsored by Sen. David Suetterlein, R-Roanoke County. One Republican – Sen. Tommy Norment of Williamsburg – voted with the Democratic majority.
Already during the 2022 legislative session, Republicans had pushed to repeal the entire tax. But Democrats agreed to only a compromise by slashing the state’s 1.5% portion of the grocery tax while retaining the 1% portion that benefits local governments to fund schools.
Suetterlein told the committee Wednesday that it made little sense to him that groceries be taxed at the local level but not at the state level.
“What the bill seeks to do is to complete the job and repeal the grocery tax, and then backfills all of the localities,” he said. “It would remove one of the most regressive taxes that we have in the commonwealth.”
The state’s flush budget allowed for a total repeal, Suetterlein said.
“We had such excessive growth in both income tax collections and general sales tax collections. We‘ve already agreed that the grocery tax is regressive, and now would be a good time to reformat that so we get rid of that regressive tax.”
In order to compensate localities for lost revenue after a repeal, Suetterlein’s bill provided for an allocation of tax dollars from the general fund, beginning with $263 million in 2024, $299 million in 2025, and followed by an annual $8 million increase every year going forward.
“Given our current changes with the amount of income tax revenue and sales tax revenue more broadly, I think now is the right time to make an adjustment in the way that we do this,” Suetterlein said.
While the Senate committee defeated Suetterlein’s proposal, Del. Joe McNamara, R-Roanoke County, filed a companion measure in the House of Delegates, where Republicans hold a 52-48 majority. But even if McNamara’s bill makes it out of the House, it will likely share a similar fate once it reaches the Senate.
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House panel kills bills to add Giles County, Pulaski County and Petersburg to Tobacco Commission territory
Also on Wednesday, a House panel nixed a proposal that would have added Giles County and Pulaski County to a group of localities that is eligible to receive funds from the Tobacco Indemnification and Community Revitalization Fund and the Virginia Tobacco Region Revolving Fund.
Both funds are controlled by the Tobacco Region Revitalization Commission, which the General Assembly created in 1999 to promote economic growth and development in formerly tobacco-dependent communities, using proceeds from the national tobacco settlement.
The 28-member panel has since awarded more than 2,000 grants totaling more than $1 billion across Virginia’s tobacco region and has provided more than $300 million in indemnification payments to tobacco growers and quota holders. It has also funded higher education.
In his House Bill 1441, Del. Jason Ballard, R-Giles County, sought to include his home of Giles County and Pulaski County because he believed the two localities would qualify to benefit from the funds under the commission’s mission statement.
“It simply says the commission seeks to meet the region’s specific challenges relating to historic dependence on tobacco production, textile and furniture manufacturing and coal production,” Ballard told a subcommittee of the House Agriculture Chesapeake and Natural Resources Committee.
The commission, Ballard said, was “established for the purpose to provide payments to tobacco farmers as compensation for the adverse economic effects resulting from loss of investment in specialized tobacco equipment in barns and lost tobacco production opportunities associated with the decline in quota.”
Giles County, which is located on the West Virginia state line, is “most definitely a tobacco dependent community,” Ballard said, adding that more than “1,000 high paying jobs” were lost as a result of the declining tobacco and cigarette market at the Celanese plant in Narrows.
Ballard also called Pulaski County an “emerging next level community” hosting a variety of strategic economic development assets that would “holistically benefit and strengthen” the commission, such as the New River Valley Airport, more than 1,000 acres of prime industrial park, and marketable real estate at Dublin’s New River Valley Commerce Park. “It is also home to Virginia’s largest automotive original equipment manufacturer, which is Volvo Trucks,” Ballard said.
Ballard added that while he understood that there may be resistance to expanding the number of localities in Virginia’s tobacco region, he asked the committee to consider his proposal.
But Del. Danny Marshall, R-Danville, who was re-appointed to the Tobacco Commission last year by Speaker Todd Gilbert, R-Shenandoah, after a two-year hiatus, said that while he wasn’t sure why Giles and Pulaski counties were not included in the Tobacco Region when the commission was founded, there wasn’t enough money for them to be added now.
“The fund balance is going down, and the amount of money we have, we have invested in different projects throughout Southside and Southwest Virginia,” Marshall said.
The committee rejected the legislation by a 6-0 vote. It also defeated a similar proposal sponsored by Del. Kim Taylor, R-Petersburg, that sought to make the city of Petersburg eligible to receive tobacco funds.
Ballard said that while he was disappointed, he wouldn’t give up. “If I’m back here next year, I will introduce this bill again,” he said in a brief interview Wednesday.