Wednesday, July 6, 2022

Local Government Officials Aren’t In Favor Of Eliminating The State Grocery Tax

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GLOUCESTER –As prices continue to rise, Virginia Governor Glenn Youngkin is pushing for the elimination of the state tax on food and personal hygiene products. Such a tax cut, though, could hurt local governments.

There are two proposals regarding the 2.5 percent tax on food and personal hygiene products. Former Governor Ralph Northam’s outgoing budget proposed removing the 1.5 percent of that tax that goes to the state, but keeping the 1 percent designated for local governments. The Virginia Senate, which is controlled by Democrats, approved it. The House, which is controlled by Republicans, wants to eliminate the tax completely, which Governor Youngkin supported during his campaign. The Virginia General Assembly is expected to decide on the issue when it meets in early June.

Of that 2.5 percent, 1.5 goes to local school funding, and the rest goes to the state’s transportation fund.

“I would certainly be happy to see the elimination of sales tax on groceries,” said John McGlennon, a member of the James City County Board of Supervisors. “The challenge is local governments and school districts really depend on that money at this point. It would need to come with the identification of an alternative source of funding.”

Carol Steele, Gloucester’s newly appointed county administrator, noted at least one proposal has the general assembly reimbursing schools for any losses they may incur. Now, it’s just a matter of seeing the state budget.

“We know the school’s portion of sales tax is going to be made up,” she said. “It’s only the county’s portion that we’re not sure of.”

She added neither the House nor the Senate has shown an interest in making up the transportation portion. That 1 percent targeted for local governments is a major part of each locality’s budget.

“All of local government is pretty much against the cut to the grocery tax because we rely on that money that comes back to local government,” she said. “It’s a major part of our budget.”

McGlennon agreed it will be a challenge.

“Total elimination of that sales tax would be pretty difficult to accomplish, especially since the governor has proposed a bunch of other tax cuts, as has the legislature,” he said.

One of McGlennon’s concerns is making sure the state doesn’t undercut the funding local governments rely on for state-mandated services.

“Obviously, everybody would love to pay less taxes but they also want more services,” he said. “That’s a challenging situation to face.”

At the York County Board of Supervisors work session May 3, county administrator Neil Morgan addressed the issue.

“Our hope is that either the 1 cent local grocery tax will survive, which is $3 million in our general fund, or if it doesn’t, that, because the state is in pretty good shape right now, that at least in the short term for next year’s budget they will provide substitute revenue.”

If the grocery tax is eliminated and the state doesn’t provide additional revenue, Morgan said he probably would need to amend the budget.

McGlennon could face the same situation in James City County, where tax rates on cars are expected to be reduced.

“We are planning to do that, but if the state cuts back significantly on the amount of money they’re providing us, I think we will probably have to reconsider that,” he said.

Not knowing what the General Assembly will do makes it tougher on the localities.

“The (county) budget has to be decided by June 30,” McGlennon said, adding he hopes the state decision comes sooner rather than later. “Local governments depend on knowing how much state aid is coming to us in various programs so that we can know if we’ve balanced our books.”

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