Democrats Ditch Youngkin’s Tax Plan, Propose $1 billion in Rebates Instead

Virginia Democrats have slammed the brakes on Gov. Glenn Youngkin’s push for tax cuts, rejecting most of his budget proposals — including a car tax credit that would have phased out the widely unpopular levy.

Instead, House and Senate budget plans unveiled Sunday take a different route, prioritizing faster, more targeted tax relief while pumping funds into education, housing, and healthcare. While rejecting Youngkin’s broader tax proposals, lawmakers included a $1 billion tax rebate for qualifying Virginians, with individual filers set to receive $200 and married filers $400.

Both chambers’ money committees also included an increase in the state’s standard deduction, though their version falls short of Youngkin’s request. The Senate’s proposal raises the deduction by $250 for individual filers, bringing it to $8,750, and by $500 for married filers, setting it at $17,500.

Additionally, the Senate budget makes Virginia’s earned income tax credit fully refundable at 20% of the federal credit. Lawmakers argue their plan would provide relief sooner — by October — rather than delaying until next year’s tax filing season, as Youngkin’s proposal would.

House Appropriations Chair Del. Luke Torian, D-Prince William, emphasized that both chambers are largely aligned on major issues. “We are here to ensure that those who can’t help themselves receive the help they need from the government,” he said.

Senate Finance and Appropriations Chair Sen. Louise Lucas, D-Portsmouth, criticized the governor’s approach, arguing it doesn’t do enough to provide stability amid economic uncertainty.

“I want to help provide Virginians with more certainty and stability in these uncertain times,” Lucas said. “This committee is different, we work together, and while we might not agree on everything … there’s a lot in this budget for everyone to be proud of and support.”

While Youngkin did not propose a general tax rebate, his budget amendments included a plan to deposit $1.1 billion into a car tax credit fund. This initiative would have provided income tax rebates to nearly 1.9 million taxpayers, targeting individuals earning up to $50,000 in adjusted gross income and couples filing jointly with incomes up to $100,000.

However, the Senate committee’s proposal excluded any form of car tax relief. Senate Democrats rejected similar proposals last week, effectively shutting down the governor’s plan.

Youngkin on Sunday evening thanked Lucas and Torian for their work on the budget amendments.

“I look forward to finishing our review and while there are areas where we agree and others where we may disagree, we will go to work to deliver for Virginians, as we have done the past three years,” he said in a statement.

Beyond tax relief, the Senate’s budget includes $217.5 million for bonuses for teachers, state employees, and state-supported local workers — an area where Youngkin had offered no additional funding.

It also allocates $15 million for rental assistance and $25 million for pilot programs aimed at expanding child care slots. The House budget similarly boosts housing funding, including $500,000 for eviction prevention and $1.5 million for a zoning policy incentive program to increase affordable housing supply.

On health care, the Senate committee proposed nearly $6 million to support maternal health initiatives, while the House put forward over $12 million. Several House proposals depend on related legislation, such as establishing mobile health clinics and ensuring presumptive Medicaid eligibility for pregnant individuals.

The House budget also includes $500,000 to increase Medicaid reimbursement for midwives, who play a crucial role in healthcare deserts.

In contrast, Youngkin’s proposed budget amendments included $2.5 million for perinatal health hubs, funding for OB-GYN residencies, and $500,000 for a public education campaign to raise awareness of life-threatening conditions like heart attacks and eclampsia. He also earmarked $1 million for workforce development programs to train midwives and doulas.

The Senate committee proposed significantly less than Youngkin on disaster mitigation — allocating $50 million compared to the governor’s $127 million.

However, Youngkin also proposed $400 million for wastewater treatment plants and $97 million for water quality improvement projects, including $50 million for Richmond’s Combined Sewer Overflow system.

Lucas emphasized that the Senate’s budget framework takes into account the state’s projected $600 million shortfall in Medicaid funding. “Due to the unprecedented increase in costs, we are focused on ensuring healthcare remains accessible for our most vulnerable,” she said.

With potential federal Medicaid cuts looming from Republicans in Congress and President Donald Trump, Del. Mark Sickles, D-Fairfax, cautioned that “there’s a long way to go in Congress,” noting that any proposals would still need to pass both the House and Senate before reaching Trump’s desk.

“We’ll pay close attention,” Sickles said. “But if they make the drastic cuts that some folks have talked about, we would have to come back here to Richmond and deal with that.”

Meanwhile, the House proposed removing language from the existing budget related to skill games regulation — language that was added last year but later vetoed by the governor.

A separate Senate bill, carried by Sen. Aaron Rouse, D-Virginia Beach, would have authorized the distribution and regulation of skill game machines in the commonwealth after their 2021 ban.

Before the Senate rejected the measure, the governor’s amendments included a cap on the number of machines allowed and a provision prohibiting them near schools, casinos, and places of worship.

by Nathaniel Cline and Charlotte Rene Woods, Virginia Mercury

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