January 13, 2015


State & Local Taxes in 2015


Virginia Tax Code Features

Progressive Features

• Provides a nonrefundable 20 percent Earned Income Tax Credit (EITC)

Regressive Features

• Narrow income tax brackets mean majority of taxpayers pay top income tax rate

• Fails to provide refundable income tax credits to offset sales, excise, and property taxes

• State sales tax base includes groceries, though taxed at a lower rate

• Fails to use combined reporting as part of its corporate income tax

Tax Changes Enacted in 2013 & 2014

• Increased statewide sales tax from 5.0 to 5.3 percent

• Increased sales tax on vehicle purchases from 3.0 to 4.15 percent

• Reformed gasoline and diesel taxes to allow the rate to grow alongside fuel prices

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Virginia has the 35th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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