Bipartisan push to repeal grocery tax in jeopardy as Senate panel rejects deal

RICHMOND, Va. (WRIC) — A push to repeal part of the grocery tax is in jeopardy after a key Senate panel rejected a bipartisan deal.

On Tuesday, the Senate Appropriations and Finance Committee failed to advance legislation to reduce the state component of the 2.5% food tax, which goes to K-12 schools and to transport. This version would have maintained the local component of one percent, rather than eliminating the tax altogether as Governor Glenn Youngkin and House Republicans have demanded. This would also exempt menstrual products and other hygiene products from sales tax.

“I think everyone was in agreement that we need to do something about this problem and we are certainly behind many other states in the fight against the grocery tax, which is one of the most regressive taxes we have,” Sen. Ryan McDougle (R-Hanover) told the committee.

The bill did not report a 9-7 vote, with mostly Democrats and one Republican opposing. After the initial vote, the committee decided to reconsider and revisit the bill on the road after further negotiations.

Sen. Jennifer McClellan (D-Richmond) has raised concerns about the long-term stability of funding for K-12 schools. The deal being considered on Friday would have replaced the lost revenue stream for schools with general funds allocated in the two-year budget. Sen. George Barker (D-Fairfax) said it was designed to be a permanent fix, but McClellan disputed that.

“So for two years we know that money lost for education will be restored, but beyond that, who knows,” McClellan said.

Sen. Chap Petersen (D-Fairfax) said repealing the state component of the food tax could ultimately disadvantage wealthier schools in his Northern Virginia district. He fears they will get less money back if funding is distributed on a formula based on need rather than student population size.

“For those of us in Northern Virginia, I have extreme doubts that we’ll see the same comeback,” Petersen said.

Sen. Emmett Hanger (R-Augusta), the only Republican “no”, fears the General Assembly will rush tax reform.

“Tax policy is something that needs to be generated through thoughtful consideration and I don’t view what we’re doing now as thoughtful consideration,” Hanger said.

In a bipartisan vote of 11-3-1, the committee elected to defer action on doubling the standard state income tax deduction. The plan is to study it before the 2023 session instead of acting immediately.

Asked about the slowdown in some elements of his tax reform agenda in a recent interview, Governor Youngkin said, “There’s a lot of money in the system. I am disappointed with some of the statements from the Senate because they are purely partisan. We will pass our entire agenda in the House and the Senate will have another chance because, from what I hear from some senators, they are very supportive of many, many elements of our game plan first day. It’s a time for us to deliver for Virginians.

Despite disagreeing over some elements of Youngkin’s plan, the Senate panel unanimously approved a bill aimed at giving money back to taxpayers through one-time refunds.

Youngkin offered $300 for individuals and $600 for co-registrants. The committee did not vote on a specific amount, instead leaving the option of deciding a number later in the budget process.