The Virginia state legislature is considering bills that would sharply increase income taxes on high earners. The most likely to pass, HB 979, would raise the top income tax rate from 5.75% to 8% for incomes over $600,000 and 10% for incomes above $1 million. Another measure, HB 378, would impose a 3.8% “net investment income tax” on most income above $500,000. Combined, the two bills could push Virginia’s top marginal rate to 13.8%, surpassing even California’s 13.3% rate for million-dollar households.

HB 979 was introduced by Delegate Vivian Watts, chair of the House of Delegates' Finance Committee, who has served in the legislature since 1996. The bill establishes two new tax brackets starting January 1, 2027, targeting high-income earners. Delegate Elizabeth Bennett-Parker’s HB 378 adds a net investment income tax that applies to interest, dividends, capital gains, and business income. Together, these measures would affect the vast majority of income for Virginia’s wealthiest taxpayers.

Virginia is already a relatively high-tax state. In 2022, the Tax Foundation ranked Virginia 20th in state and local tax collections per capita, with an average of $6,845. Analysts warn that increasing rates to 10% or higher could drive wealthy residents to neighboring states with lower tax burdens, including North Carolina (3.99%), West Virginia (4.82%), Kentucky (3.5%), and Tennessee (0%). Past experiences in states like Maryland show that high taxes on millionaires often shrink the tax base rather than increase revenue.

Critics also point out that Delegate Watts’ claim that Virginia has “low taxes” is outdated. Virginia’s tax rates now exceed those of most surrounding states, which have reduced top rates in recent years. Experts warn that raising income taxes to the proposed levels could worsen outmigration of affluent taxpayers and investors, threatening both revenue and economic growth.

With significant public and business attention on these proposals, lawmakers are weighing the potential impact on Virginia’s economy and competitiveness. If approved, the new rates would take effect in 2027, potentially reshaping the state’s tax landscape and influencing where high-income Virginians choose to live and invest.