Commentary: Virginia Should Seriously Consider Eliminating the State Income Tax

Virginia’s elected leaders should take a serious look at joining the states that do not tax personal income.

This is not an idea to rush into blindly, and it is not something that can be solved with a slogan. But a January 2026 report from the Council of Economic Advisers, titled “The Economic Impact of State Income Tax Elimination,” provides Virginia lawmakers with a serious starting point for the conversation. The report argues that states relying less on income taxes and more on other forms of taxation are often better positioned for economic growth, job creation, investment, and population gains.

The CEA report is not the final word on tax reform, but it is a serious starting point that Virginia leaders should not ignore.

The report points to states such as Florida, Tennessee, and Texas as examples of places that have attracted residents and businesses while operating without a personal income tax. Virginia competes with those states every day for workers, retirees, entrepreneurs, and employers. We should be asking whether our current tax structure helps us compete or holds us back.

For Virginia, the report’s estimates are worth attention. It says eliminating the state income tax and replacing the revenue with a broader sales tax could increase Virginia’s gross domestic product by $8.4-$12.8 billion, depending on the model used. It also estimates average wage gains of about $4,773 to $4,968, 638 new top 1 percent taxpayers, and a 16 to 20 percent increase in new startup activity.

Those numbers came from the CEA report, and they should be studied carefully, questioned honestly, and debated publicly. But they should not be dismissed.

Tax policy affects decisions. Families think about where they can afford to live. Retirees think about where their savings will go further. Small business owners think about where they can grow. Young workers think about where opportunity is strongest. When other states allow people to keep more of what they earn, Virginia has to compete harder.

That is why our politicians should begin a serious review of how Virginia could phase out the income tax over time.

This does not mean cutting essential services overnight. Schools, roads, law enforcement, health care, and local governments matter. Any responsible plan would have to protect core services, avoid sudden disruption, and be honest about what revenue replacement would look like.

The CEA report considers two approaches: one with full revenue replacement through a broader sales tax, and another that combines a broader sales tax with limits on spending growth. The report also describes exemptions for rent, housing, groceries, excise-taxed goods, and business capital expenses. Those details matter because any reform must protect working families and avoid taxing basic needs too heavily.

That is where the real work begins.

Virginia should launch a serious, bipartisan effort to study eliminating the income tax. Lawmakers should hold public hearings, hear from economists, local governments, business owners, workers, retirees, and families, and compare Virginia’s competitiveness with no-income-tax states. They should examine the effect on rural communities, suburban families, small businesses, and fixed-income residents.

They should also look carefully at spending. If Virginia wants a tax system that rewards work and growth, elected officials must be willing to ask whether every dollar is being spent wisely. Tax reform and spending discipline should go hand in hand.

The goal should not be to copy another state without thinking. Virginia has its own economy, needs, and obligations. But the goal should be to make Virginia more competitive, more affordable, and more attractive for people who want to work, build, invest, and stay here.

Our leaders often say they want Virginia to be the best state for business and the best state for families. Eliminating the income tax should be part of that discussion.

The CEA report provides lawmakers with numbers to review and a framework for debate. Now, Virginia’s elected officials should have the courage to do the work. Study it. Debate it. Improve it. Protect essential services. But do not ignore it.

Virginia should not be content to watch no-income-tax states attract people and opportunity while we defend the status quo. It is time for our politicians to seriously consider a path to eliminate the state income tax and make Virginia stronger for future generations.