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The inflation challenge facing America’s governors has coincided with a somewhat opposite trend: state budgets that are flush following a period of better than expected tax revenues and ample coronavirus assistance from Washington, DC.
Governor Glenn Youngkin (R-VA), one of many governors in that situation, says his budget forecast shows $15 billion more than expected — and that windfall can fight inflation, he said.
The governor signed a budget this week with a mix of tax cuts and spending increases, and he highlighted those changes during a wide-ranging conversation with Yahoo Finance’s Andy Serwer Thursday. Those changes include $4 billion in tax relief and new spending on education, law enforcement, and behavioral health.
“We have been overtaxing Virginians,” Youngkin said. He added that his constituency faces "the silent thief that is inflation when they are hard-working folks trying to make ends meet [and] this is a way to let them have some of that money back.”
Youngkin’s budget eliminates the state’s 1.5% state grocery tax, doubles the standard deduction for state taxes, gives every taxpayer a rebate, and cuts taxes on retirement income for veterans.
“This is a chance for us to rebalance what has been a really lopsided overtaxation environment,” Youngkin says.
‘We can afford this’
The governor is also pushing for a gas tax holiday in his state but has been stopped in that effort by Virginia legislators who have repeatedly tabled the idea.
Democrats control the commonwealth’s senate and have repeatedly rejected a tax holiday. One member of Youngkin’s own party, State Senator Emmett Hanger, has also bucked the governor to vote against it.
“We can afford this,” a frustrated Youngkin said Thursday, noting that he is being stymied by Democrats. “But then you turn around and you see the White House calling for a three-month suspension of the gas tax. This is not politics — this is a chance for us to do the right thing for Virginians.”
In Washington, a range of powerful figures from Senate Republican Leader Mitch McConnell to House Speaker Nancy Pelosi to the moderate Sen. Joe Manchin (D-WV) have expressed skepticism of a federal gas tax holiday. But some other governors have pushed for it at the state level.
Gov. Gretchen Whitmer (D-MI) has been outspoken in favor of dropping gas taxes, while all the way across the political spectrum, Gov. Ron DeSantis (R-FL) recently signed a suite of tax cuts that includes a one-month gas tax holiday in October.
A host of other states from Connecticut to Maryland have implemented their own plans.
Overall, Youngkin says these moves are key for his state to fight inflation and avoid a recession. “This is why we finally see people saying, hey, I want to stay in Virginia,” he said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.