Stunning 13.8% TAX BOMB

Person filling out a tax return form with a calculator nearby

Virginia Democrats are pushing legislation that could catapult the state to the nation’s highest income tax rate at 13.8%, surpassing even California’s notorious 13.3% burden, as two separate bills targeting high earners move through a legislature now fully controlled by tax-and-spend progressives.

Story Snapshot

Democratic bills HB 979 and HB 378 would stack new 10% income brackets with a 3.8% investment tax, reaching a combined 13.8% rate for top earners by 2027
Proposals target individuals earning over $500,000 to $1 million, reversing Virginia’s once-competitive 5.75% top rate while neighbors slash taxes
North Carolina cut rates from 5.8% to 3.99% since 2015; Tennessee and Florida maintain zero income tax, creating exodus risks for Virginia
House Finance Committee Chair Vivian Watts’ HB 979 deemed “most likely to pass” by lobbyists under unified Democratic control

Democrats Eye California-Style Tax Hikes on Successful Virginians

House Bill 979, sponsored by Delegate Vivian Watts, would establish new income tax brackets of 8% for earnings between $600,000 and $1 million, and 10% for income exceeding $1 million, effective January 1, 2027. This represents a dramatic leap from Virginia’s current 5.75% top marginal rate, which has remained stable since at least 2015. Simultaneously, Delegate Elizabeth Bennett-Parker’s House Bill 378 proposes a 3.8% tax on net investment income—including interest, dividends, capital gains, and business income—for taxpayers earning over $500,000. Combined, these separate bills could impose a staggering 13.8% effective rate on high earners’ investment income, exceeding California’s 13.3% top rate and making Virginia the highest-taxed state in the nation.

WHAT HAPPENED TO AFFORDABILITY? Tax Rate in Virginia Poised to Become Highest in the Nation After Democrats Take Over | The Gateway Pundit | by Mike LaChance https://t.co/xrSGkbbzE6

— Craig S. (@s1058471) January 24, 2026

Virginia Abandons Competitiveness as Neighbors Slash Rates

While Virginia Democrats pursue aggressive tax increases, neighboring states have moved decisively in the opposite direction, creating a stark competitive disadvantage. North Carolina reduced its income tax rate from 5.8% in 2015 to just 3.99% today, with plans to lower it further to 2.49%. Kentucky dropped to 3.5%, West Virginia to 4.82%, and Georgia to 5.09% in 2026 with phase-out plans. Tennessee and Florida maintain zero income tax, positioning themselves as magnets for businesses and high-income individuals fleeing punitive rates. Virginia’s current 5.75% rate already ranks above average nationally, placing it 20th in per capita state and local tax collections at $6,845 in 2022. The proposed hikes would demolish what remains of Virginia’s appeal to job creators and investors.

Investment Income Faces Double-Digit Tax Assault

HB 378’s proposed 3.8% net investment income tax poses particular danger for Virginians whose income derives primarily from investments, retirement accounts, or business ownership. When stacked atop the existing 5.75% rate, passive income would face a 9.55% combined state tax burden even without HB 979’s passage. Should both bills become law, high earners with substantial investment portfolios or business income would confront the full 13.8% rate, creating powerful incentives to relocate to zero-tax Tennessee or low-tax North Carolina. Tax analysts at Marschall Tax warn this competitive dynamic overwhelmingly favors states that have cut rates, noting Nebraska’s recent reduction to 4.55% further isolates Virginia. For investors deriving over 90% of income from capital gains or business profits, the effective burden would devastate returns and accelerate wealth migration southward.

Affordability Crisis Deepens Under Democratic Control

Virginia Democrats secured unified control of the state legislature following the 2025 elections, enabling them to advance tax increases without Republican obstruction. Americans for Tax Reform identifies HB 979 and HB 378 as part of an “array of new taxes” including HB 900’s sales tax hikes, characterizing Democrats as “pouncing on taxpayers” while other states pursue relief. Lobbyists report HB 979 has an “excellent chance” of passage due to Delegate Watts’ chairmanship of the House Finance Committee. These proposals arrive as Virginia faces mounting affordability challenges, with high living costs already driving modest out-migration to lower-tax states. Federal employment downsizing in 2025 further weakened the state’s economic position, making tax increases particularly ill-timed. The bills remain pending as of late January 2026, with no votes or hearings reported, but the political momentum under Democratic dominance suggests Virginia taxpayers face serious threats to their wallets and the state’s economic future.