Virginia Democrats act quickly to raise taxes.
Under unified Democrat control, Virginia is poised to become a tax-hiking outlier in a region full of states that are phasing out their income taxes. Immediately upon seizing control of government, Virginia Democrats introduced the following bills that seek to impose an array of new and higher taxes:
HB 378 – Imposes a 3.8% net investment income tax on individuals, trusts, and estates beginning in taxable year 2027. If enacted, HB 378 would raise VA’s top marginal income tax rate on portfolio and passive income to 9.55%.
HB 188 – Creates a new top income tax bracket of 10%. This would give Virginia the 5th-highest top income tax rate in the country.
HB 979 – Creates two new income tax brackets, with rates of 8% and 10%.
HB 900 – Authorizes sales tax hikes in various transportation districts, imposes a new tax on each and every retail delivery in Northern Virginia (Amazon, Uber Eats, FedEx, UPS, etc.), similar to the one imposed in Minnesota by Gov. Tim Walz (D).
HB 919 / SB 763 – Imposes a firearm and ammunition tax equal to 11% percent of the gross receipts from the retail sale of any firearm or ammunition by a dealer in firearms, firearms manufacturer, or ammunition vendor, as such terms are defined in the bill.
HB 978 – Dramatically expands the state’s retail sales and use tax by extending it to a broad range of services that have traditionally been exempt from taxation. The sales tax would newly apply to admissions, charges for recreation, fitness, or sports facilities, and a wide array of nonmedical personal services or counseling.
The bill also targets numerous personal and household services, including dry cleaning and laundry services, companion animal care, residential home repair, maintenance, landscaping, or cleaning services. In addition, vehicle and engine repair, repairs or alterations to tangible personal property, storage of tangible personal property, and delivery or shipping services would all become subject to the sales tax.
Beyond traditional services, HB 978 extends the sales tax to digital and professional services. The sales tax would now apply to software application services, computer-related services, website hosting and design, data storage, and digital subscription services. It also taxes travel, event, and aesthetic planning services.
HB 334 / SB 66 – Allows localities in Virginia to implement a local sales tax.
SB 129 / HB 145 – Imposes a new 10 percent tax on a fantasy contest operator’s fantasy contest revenue.
HB 935 – Requires the developer of a solar energy project or an energy storage system to pay a one-time fee of $0.02 per watt of generation or storage capacity to the Fund. This per-watt fee can quickly translate into hundreds of thousands or even millions of dollars in added costs before a project generates any power. All of which will be passed onto consumers.
These proposed tax hikes aren’t the only cost-increasing policies that Democrats are poised to impose on Virginians. For example, Governor Abigail Spanberger (D-Va.) has already announced she will reinstate Virginia as a member of the Regional Greenhouse Gas Initiative (RGGI), a regional cap and trade regulatory regime that acts as a backdoor carbon tax. RGGI membership comes with higher utility bills by design, which is why Spanberger’s predecessor, Glenn Youngkin (R), took action to remove Virginia from the regional cap and trade program.
With control of all the levers of power in Richmond, what Democrats are seeking to do in Virginia stands in stark contrast to what is happening in other states around them. In neighboring West Virginia, lawmakers are in the process of phasing out their state income tax. Meanwhile in North Carolina, the state’s flat income tax fell from 4.25% to 3.99% on the first day of 2026. Not only that, North Carolina’s personal income tax rate will continue falling in the coming years until it hits 2.49%, and the state’s corporate income tax will be fully phased out by the end of this decade.
If all or even some of the tax hikes proposed in Richmond are enacted, Virginia will also have a harder time competing for job-creating investment with Georgia, where the income tax rate fell from 5.19% to 5.09% at the beginning of January. What’s more, the Georgia Senate is now advancing a plan to fully phase out their income tax in the coming years. Full income tax phase out is also a goal that all the top contenders to be South Carolina’s next governor are now campaigning on.
Nearly all the states around Virginia, and many more across the country, are moving in the opposite direction from which Democrats seek to take tax policy in the Old Dominion. Even the states that already avoid taxing income are finding ways to make their tax codes less burdensome and even more competitive.
“It’s always a bad time to raise taxes, but it would be particularly foolish for Governor Spanberger and the Democrats who now control Richmond to do so at this time of heightened state tax competition,” said Grover Norquist, president of Americans for Tax Reform. “Governors and lawmakers in other states aren’t just seeking to reduce income taxes and other levies, they’re pursuing full tax elimination in many state capitals. For individuals, families, and employers who wish to avoid the hostile tax policies pursued by Democrats in Richmond, they have plenty of options close by.”
