Governor’s car tax rebate nixed for one-time refund for all taxpayers, Helene recovery aid decreased in General Assembly budget proposals

You can read all of the proposed budget amendments here.

Budgets presented by the House of Delegates and state Senate money committees on Sunday reduced the amount of money for Hurricane Helene recovery, compared to Gov. Glenn Youngkin’s proposal, and made no changes to the much-hated car tax. 

Instead, both committees opted to earmark about $1 billion of the state’s current revenue surplus for one-time rebate checks for all tax-paying Virginians, in lieu of a car tax rebate. Both committees also planned for $25 million in Hurricane Helene relief money for individuals to repair and rebuild, though that number could change as the budget amendment process continues. 

“Since the governor’s introduced budget came out, I have stated and prioritized that working families and individuals need immediate relief,” Senate President Pro Tempore Louise Lucas, D-Portsmouth, said during the committee’s presentation. 

Lucas, who chairs the Senate Finance Committee, said she did not agree with the details of the governor’s approach in the budget amendment proposal he laid out in December. A big concern, she said, was that the tax relief Youngkin proposed did not benefit every tax-paying Virginian. 

In an interview with Radio IQ on Monday, Lucas said the decrease in Helene aid was due to uncertainty in Washington, D.C., regarding the new administration and the new Congress, and the need to be financially prepared should federal funding to the state for programs end or decrease.

“The budget is kind of a waltz — the governor has the first dance and we respond to that the best we can, the House responds, and then we go through three weeks of negotiations,” said Sen. Creigh Deeds, D-Charlottesville. 

The House and the Senate will work to merge their two budget proposals, and then work with Youngkin to get the final budget amendment document passed and signed. 

“It’s yet to be seen what the final document is going to be,” Del. Terry Austin, R-Botetourt County, said during a phone call after both committee presentations had concluded. “We’ve got a lot of work in front of us.”

Regardless, he said, he is hoping to see a final product that will return money to Virginians. 

A rebate for all

A car tax-specific rebate and an effort to end the long-reviled tax might not have been included, but both the Senate and House proposals include a tax rebate check of $200 for single filers and $400 for joint filers. 

Both the House and Senate proposals also extend the current standard deduction. The deduction, which is set to expire Jan. 1, 2026, is currently $8,500 for single taxpayers and $17,000 for joint filers. (Upated 8:23 a.m. with correct numbers.)

“I think our budget shows that there is a return to the citizens,” Austin said of the House’s working document. 

He noted that the tax rebate checks — which would go out to all Virginians instead of only to those with cars who make less than $50,000 annually — would cost about the same as Youngkin’s effort to provide a rebate on the car tax: around $1 billion.

Critics of Youngkin’s effort to do away with the car tax had argued that there needed to be a way for local governments to make up for lost revenue. Youngkin’s car tax relief effort, dubbed the Working Class Car Tax Credit, would have cost about $1.1 billion to pre-fund the first three years of what the governor intended to be a permanent rebate.

The importance of the personal property tax, better known as the “car tax,” to local coffers varies by locality. It accounts for 9.34% of the general fund revenues in Salem, for instance, but 20.66% in Prince Edward County, according to local officials. In Roanoke County, that tax accounts for 17.08% of general fund revenues. In Lynchburg, it makes up 10.8% of total revenues, not counting the money the state chips in under the Personal Property Tax Rebate Act. Including those state funds, the personal property tax makes up 13.2% of total revenue in Lynchburg.

Final Helene aid still to be determined

Regarding Helene aid, the $25 million amount proposed by both the House and Senate on Sunday is a fraction of the $127 million Youngkin floated in December. 

In Youngkin’s proposal, $25 million would have come from the state’s general fund and $102 million from proceeds of Virginia’s 2023 participation in the Regional Greenhouse Gas Initiative, or RGGI, that had not yet been appropriated. 

The House and Senate proposals included the $25 million in general fund money but omitted the $102 million.

The final amount for relief and recovery put forth by the General Assembly could change as the process continues. 

“This is just the start of a negotiation process,” Del. Will Morefield, R-Tazewell County, said in a text message Sunday. “I anticipate there will be a number of changes to the House and Senate proposals, but I do want to stress to hurricane victims that ultimately we will adopt a relief package that will provide help where help is needed the most.”

The Senate included about $50 million for disaster mitigation for qualified communities, though details regarding that line item were scarce Sunday evening. 

Other items included in the budget proposals

“Skill” games: The Senate budget proposal also includes language regarding so-called electronic “skill” games, though that topic was absent from the House’s plan, signaling potential conflict ahead.  

Youngkin vetoed a bill that passed the General Assembly in a bipartisan vote during the 2024 session that would have provided a framework to legalize skill games in Virginia.

“There are a whole lot of businesses that count on skill games as part of their business model, and we just think that ought to be part of the discussion moving forward,” Deeds said during a phone interview Sunday night. 

Bonuses for teachers: Both the House and Senate proposed a $1,000 bonus for teachers and instructional staff that would be delivered by June 1 if passed. It would not require any local match and would cost the state about $217.5 million. 

Local referendums on sales tax for schools: Another proposal introduced in the Senate budget Sunday would expand the authority for localities to hold referendums on sales tax for schools. 

Currently, only Charlotte, Gloucester, Halifax, Henry, Mecklenburg, Northampton, Patrick and Pittsylvania counties and the city of Danville are authorized to impose a local sales tax increase for schools, provided that voters approve it in a referendum. The General Assembly last year passed a bill, pushed by Del. Sam Rasoul, D-Roanoke, to expand that authority to all localities, but the governor vetoed it.

“In response to the ongoing need to renovate our schools, we expand to all localities the authorization to impose a local sales tax of up to 1.0% to support school renovation and construction once the locality receives approval by a local referendum,” said Sen. Mamie Locke, D-Hampton. 

Lab schools: Both the House and Senate proposed redirecting new money that had been slated for lab schools, which Youngkin has pushed to expand.