Combined taxes place Old Dominion among states with the highest tax rates.
Virginia ranked No. 40 nationally for its Tax Freedom Day, according to a study by the Tax Foundation.
In Virginia, Tax Freedom Day falls on April 27, one of the latest in the country. According to the Tax Foundation, Tax Freedom Day is a day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income.
“The message I would emphasize is, Virginia has consistently been a high-tax state, and I think that’s something Virginians don’t realize,” Jared Walczak, a Tax Foundation policy analyst, told Watchdog.org. “You often hear how Virginia is a low-tax state, but that’s not really the case.”
Several surrounding states, including West Virginia, Kentucky and Tennessee, were ranked among the 10-best states, with Tax Freedom Days falling earlier in the year. This difference could limit Virginia’s business competitiveness.
In Virginia, there are four brackets that determine income tax rates, with the highest earners paying 5.75 percent to the state, similar to many neighboring states, and the 25th highest rate nationally for individual income tax, which are often tied to small business owners’ tax rates. However, other southern states like Florida, Alabama and Mississippi have lower or no income taxes.
In 2012, the Tax Foundation found that Virginia residents paid $1,254 per person in local income taxes, the 10th highest amount nationally that year.
Many small business owners are quick to blame Virginia’s antiquated Business, Professional and Occupational Licenses, or BPOL taxes, as a big burden on business and a reason overall taxes are so high. This 200-year-old tax system has been heavily debated over the past few years. But researchers point to combined sources, including income, BPOL and others, that add up to overall higher taxes.
