Virginia’s Secretary of Finance Stephen Cummings speaks to the legislative money committees in Richmond Wednesday as Senate Finance Chair Louise Lucas, D-Portsmouth, looks on. (Charlie Paullin/Virginia Mercury)
With a new presidential administration taking office in January, Gov. Glenn Youngkin expressed optimism about potential fiscal benefits for Virginia, even as Democratic lawmakers voiced concerns about looming challenges.
“I am so looking forward to having a period of tailwinds that will come out of Washington,” said Wednesday following his budget proposal presentation in Richmond, signaling confidence in President-elect Donald Trump’s economic agenda.
Trump has indicated plans to bring back the 2017 corporate tax cuts, raise tariffs on imported goods, and cut federal jobs, sparking debate among Virginia lawmakers over potential impacts. Discussions also touched on federal Medicaid cuts, which could significantly affect the state’s healthcare funding.
Speaking during a joint session of the General Assembly’s money committees, Virginia’s Secretary of Finance Stephen Cummings mixed corporate income tax trends, noting that while refunds tied to corporate tax payments were slightly up, corporate tax revenues are down by $177.4 million compared to the same time last year. Cummings cited an uptick in corporate tax refunds as a contributing factor.
“We’ve actually built in on corporate income tax a very conservative corporate tax view, reflecting some of the things that have taken place to date,” Cummings said.
Youngkin defended tariffs as a way to ensure “America gets good deals first with our adversaries,” noting that the policy, first implemented by Trump during his first term, has continued under President Joe Biden.
“What I am seeing as a result of the discussion around tariffs is a literal line of businesses that want to invest in America, and particularly in Virginia,” Youngkin said, though he did not provide specific examples. “I think we’re going to see another level of growth here in the commonwealth as a result.”
However, the Tax Foundation, a nonprofit think tank, projects that while tariffs could raise between $2 billion and $3.3 trillion from 2025 through 2034, they would also increase the cost of goods. This could result in an average annual tax burden of $1,253 to $2,045 per U.S. household over the same period.
Del. Cliff Hayes, D-Chesapeake, expressed concerns over the broader application of tariffs compared to previous policies, which were more focused on China.“That’s a distinct difference from 2016 when it was more targeted on certain countries,” Hayes said. “Now we’re hearing about a more broad application.”
Cummings defended the previous tariffs, arguing that they contributed to economic growth despite targeting basic goods like steel and aluminum, which have widespread effects on manufacturing. “I don’t think you can really separate the two,” Cummings said, referring to the different types of tariffs being proposed.
Nationally, Democrats have improvements in the economy showing, pointing to a steady decline in inflation since its pandemic-era peak. On Wednesday, the Federal Reserve lowered interest rates by another 0.25%, attributing the move to favorable economic conditions resulting from current policies.
Del. Candi Mundon-King, D-Prince William, raised concerns about the potential economic impact of federal job cuts, which would disproportionately affect Northern Virginia, home to a significant portion of the state’s federal workforce. A George Mason University analysis released before the election estimated that eliminating 100,000 positions could result in an annual loss of $27-28 billion for Virginia’s economy.
“That’s very definitely on the radar screen,” Cummings said, acknowledging the potential effects of such “very aggressive actions” on Virginia’s more than 200,000 federal workers.
Cummings noted that while federal jobs represent a small percentage of Virginia’s 4.2 million workers, their loss would still be felt. ”It’s not insignificant, but it’s not huge,” he said, adding that the private sector could potentially absorb displaced workers, given Virginia’s low 2.9% unemployment rate.
Sen. Barbara Favola, D-Arlington, expressed concerns about the potential for federal cuts to the Medicaid expansion program’s funding match, emphasizing the importance of maintaining coverage for Virginians.
“There’s an incredible benefit to having all Virginians insured,” Favola said, noting the link between health insurance and workforce participation. “I would hope the administration would be very amenable to continuing, at a minimum, our policy of insurance remains as many Virginians need insurance.”
Cummings assured lawmakers that the state is prepared for potential Medicaid funding challenges. “We have fully provided for all the liabilities that we know of around Medicaid, and built in growth in our five-year plan.”
Democratic leaders, who control the House of Delegates and the state Senate, said Wednesday they are still reviewing Youngkin’s budget proposals ahead of negotiations set to begin when the legislative session starts on Jan. 8.
YOU MAKE OUR WORK POSSIBLE.