The lodestar guiding the White House Coronavirus Task Force’s coordinated response to the coronavirus pandemic gripping America is “locally executed, state managed, and federally supported.” As supporters of the principle of federalism, we support empowering state and local policymakers to make the right decisions for their constituents. As the national response to the COVID-19 virus continues to unfold, it is important to remember states have a crucial role to play.
Many states have risen to meet the challenge. State governments cannot print money or carry trillions in debt like the federal government. But they are much closer to the economic woes facing millions of people, who are out of work or were forced to close their business to comply with health policy measures. One extremely positive way states have responded to the coronavirus crisis has been to delay their income tax filing and payment deadlines. The IRS recently announced this for federal taxes: July 15 is now 2020’s federal Tax Day. For families and businesses struggling to stay afloat during these challenging times, the last thing they need to be worried about is tax law compliance or figuring out how to pay the taxman with empty bank accounts.
Thankfully, 38 of the 41 states with personal income taxes have extended the deadline for tax filing and payment to July 15 or later. Unfortunately for hardworking individuals and businesses in the Commonwealth of Virginia, the government has not pushed back its May 1 income tax filing deadline by even one day.
Families are grappling with the new realities of life, child care needs, and potential unemployment. Unbelievably, it’s nearly business as usual for the income tax collectors in Richmond.
Virginia offered some limited tax relief in response to the economic shutdown, but they are half-measures compared with other states’ tax actions. Virginia taxpayers will have the option to delay income tax payments originally due May 1 until June 1. But if the full tax liability is not received by the state on June 1, taxpayers will owe a late payment penalty. Worse yet, taxpayers will still owe interest on tax payments made after May 1. And even though taxpayers have always been able to get an automatic six-month extension for filing their taxes, the money owed is still due by May 1 to avoid interest charges.
When asked about offering a further tax payment or filing deadline extension, Finance Secretary Aubrey Layne replied that Virginia could not offer a July 15 deadline, because the state must balance its budget. It is clear many Virginia taxpayers will find this answer unsatisfactory, since 49 states have balanced budget requirements, and they are finding ways to prioritize taxpayers by delaying their tax filing deadlines. Layne also mentioned further tax relief was an option in the event of federal aid to states.
First, Virginia, along with other states, should resist making fiscal policy contingent on federal money. Second, relying on the federal government to make the first move is antithetical to the idea of state autonomy and federalism, principles that are in the best long-term interest of our commonwealth.
With May 1 just around the corner, Virginia is running out of time to offer relief to Virginia taxpayers hit hard by the economic shutdown. Layne mentioned the possibility of further relief when legislators return to Richmond on April 22 for the annual veto session. But can individual and business taxpayers be expected to wait on an answer that long? Even worse, delaying a decision on tax deadline extension denies Virginians the ability to take advantage of the July 15 federal tax filing deadline. Since Virginia income tax calculations start with federal adjusted gross income, taxpayers would need to complete their federal information before starting their Virginia taxes.
Virginians will need ample time in the coming weeks to take care of their families. They shouldn’t have to deal with tax payments or filings right now. Businesses will need time to figure out how to reopen their doors successfully after we emerge from this crisis. They also shouldn’t have to deal with taxes right now. If we make them divert their precious time away from their families and away from their livelihoods, the costs will be enormous.
Jonathan Williams (@taxeconomist) is the executive vice president of policy and chief economist at the American Legislative Exchange Council. Skip Estes (@Skip_Estes) is the legislative manager at the ALEC Center for State Fiscal Reform.
