The following is my column that will appear in the Mt. Vernon Gazette, Springfield Connection, The Prince William Times, The Fort Hunt Herald, and Potomac Local in the week of November 26, 2018.
Federal Tax Reform to Force Action at 2019 General Assembly SessionAt a recent Senate Finance Committee retreat, state legislators had a preview of economic and revenue projections and other significant issues expected to be debated in the 2019 General Assembly session.A vice-president of Moody’s Analytics said that Virginia’s economy continues to perform well due to increased federal spending coupled with federal tax cuts. However, he likened the performance to a sugar high and said that indicators are starting to point toward a recession in the next two years because of increased interest rates and increased import/export tariffs. He cautioned that rising lending could exacerbate a recession. He also noted that Virginia’s budget was well positioned for a recession because we have bolstered our Rainy Day Fund.Next, we examined the state budget. Nearly 70 percent of Virginia’s general fund revenue comes from income taxes. Traditionally, Virginia has been a “conforming” state, meaning that the Virginia’s definition of adjusted gross income is identical to the federal definition and taxpayers and accountants do not have to use two different sets of rules to figure out taxes. However, the tax bill passed by Congress in early 2018 significantly rewrote what constitutes income and limited deductions. Most significantly, Congress and President Trump limited the deductibility of real estate taxes and state and local income taxes to a total of $10,000 (aka “SALT”).
