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Bill

SB 702

Income tax, state; brackets, deductions, and exemptions, inflation indexing.

2026 Regular Session Introduced by Kannan Srinivasan

SB 702 automatically adjusts Virginia income tax brackets, deductions, and exemptions annually for inflation to prevent effective tax rate increases without legislative action.

Continued to next session in Finance and Appropriations (10-Y 5-N)
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Bill Summary · SB 702

Legislative bill overview

SB 702 would implement automatic annual inflation adjustments to Virginia's state income tax brackets, deductions, and exemptions. This means the income thresholds at which higher tax rates apply and the amounts taxpayers can deduct would increase each year based on inflation, preventing "bracket creep" where inflation automatically pushes taxpayers into higher tax brackets without legislative action.

Why is this important

Inflation indexing affects tax burden distribution across all income levels. Without it, inflation gradually increases effective tax rates over time even when nominal tax rates stay constant—meaning taxpayers pay more in real dollars simply due to price increases. This mechanism is already used in federal income tax and several other states, making it a significant policy choice about whether Virginia's tax code adjusts automatically or requires repeated legislative adjustments.

Potential points of contention

  • Revenue impact: Automatic indexing reduces state tax revenue growth relative to current law, potentially affecting funding for state services unless offset by other means
  • Regressive vs. progressive effects: The distributional impact depends on which brackets, deductions, and exemptions are indexed—some combinations may disproportionately benefit higher or lower income earners
  • Legislative control: Automatic adjustments remove the annual opportunity for lawmakers to deliberately adjust tax policy, raising questions about fiscal planning and legislative autonomy

Compiled from official sources — confirm details with the bill’s official record.

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