Winners and losers in Virginia's special tax refund: GOP plan favors the rich

Republicans have set up a plan that will give Virginians a one-time tax refund check of up to $220 this fall, just weeks before the election. But there’s a catch — this special one-time tax refund won’t go to the people that need it most.

Winners and losers: Most upper-middle class and wealthy Virginian taxpayers will get a surprise tax bonus this fall — $110 for individuals and $220 for married couples filing jointly. Most poor people will not. That could further criticism that the state’s Republican-led tax law changes benefit the rich over the poor.

Thousands of filers will miss out on their checks because their state income tax liability was offset by existing state tax credits, like the Earned Income Tax Credit, which benefits low-income working families.

Virginia Democrats tried to level the playing field with an amendment to exclude using tax credits to determine whether a filer will be eligible to receive the extra refund. That proposal would have provided relief to thousands of families who did not benefit from the new tax laws by extending the one-time tax refund to 151,000 more taxpayers, most of them earning less than $50,000 a year.

A bipartisan majority of the state House agreed to this budget amendment by a vote of 62-37. But Senate Republicans unanimously opposed the measure, striking it down by a count of 20-18.

Other Virginians won’t get their share of funds from the Taxpayer Relief Fund — established to collect this year’s excess revenues — because thei share will be used to offset outstanding debt as part of a “debt set off” program, a legal remedy for collecting delinquent debts owed to Virginia government units and courts. In other words, people who are too poor to pay outstanding bills, such as court fees, to state and local government vendors, won’t get a check. Instead, their debtors will.

Politics at play: Republicans hold Donald Trump’s signature legislative achievement, the Tax Cuts and Jobs Act of 2017, in much higher regard than a majority of Americans. That could explain why the Republican-led Virginia General Assembly decided to send payouts from the taxpayer relief fund just weeks before the next election.

Though many will enjoy the one-time gift, Republican candidates may face an optics issue when 2.5 million Virginians get their checks, but 1.5 million of their neighbors don’t.

By the numbers: By a 2-to-1 margin, voters said Trump’s federal tax law benefits “large corporations and rich Americans,” over middle-class families, according to a 2018 survey commissioned by the Republican National Committee. The survey results prompted a stunning admission from the RNC: “we’ve lost the messaging battle on the issue,” it wrote in its report.

Making matters worse: Federal tax refunds for 2018 are down from past years, according to the IRS. Because refunds might be the only thing the average taxpayer enjoys about tax-filing, messing with them was a risky political choice.

The same is true in Virginia. As of June 1, 2019, tax refunds are down 10.3 percent compared to the same period last year, according to Virginia Sec. of Finance Aubrey Lane.

State of play: Republicans have controlled Virginia’s bicameral legislature for the greater part of two decades, but in 2017 a blue wave brought Democrats within two seats of the majority in both chambers.

The big question: In the poll mentioned above, independent voters said by a 36-point margin that large corporations and well-off Americans benefit the most from Trump’s tax law. Now that Virginia has woven most of the GOP tax law provisions into the state code, the question for Republicans is how the one-time refund, which primarily benefits wealthy Virginians, will play among independent voters.

For low-income groups, which generally lean Democratic, the question is to what degree missing out on the tax refund will mobilize participation in the 2019 General Assembly elections.

What’s next: Virginians who subscribe to the view that recent tax law changes benefit the rich over the poor or those upset about the dip in this year’s tax refund might feel better when they get their refund checks in the mail this fall.

If the estimated amount of the taxpayer relief fund is insufficient to issue the full amount to qualified taxpayers, then refunds would be reduced and prorated accordingly. However, the secretary of finance said at a hearing this month that the state expects to be able to issue the full amount.

Most of the payments will arrive between mid-September and mid-October. The General Assembly elections take place a few weeks later, on Nov. 5.

One thing is certain: Lower-income groups won’t be any better off than they were before.

P.S.: The nearly 350,000 Virginia taxpayers who are eligible for the one-time tax return need to file their returns by July 1 to qualify for the payment.