Virginia Gov. Glenn Youngkin, a Republican, is pushing to eliminate taxes on tips ahead of the commonwealth's next legislative session.
This proposal would return an estimated $70 million annually to the pockets of Virginia workers, Youngkin's office said Monday in a press release.
An end to taxes on tips could help more than 250,000 people in Virginia who work within the food service industry, the personal service industry such as hairstylists, the hospitality industry and others who receive tips through their employment in other industries.
"We have delivered over $5 billion in tax relief to date, and we remain committed to lowering the cost of living for hardworking Virginians. It’s their money, not the government’s," Youngkin said in the release.
"By removing tips from taxable income, it will directly increase the take-home pay of hundreds of thousands of Virginians and give them more buying power, which in turn will improve financial stability, stimulate local economies, and honor the value of their hard work," he continued.
Virginia workers who earn tips would be able to claim a deduction on their state tax return if the income is included in their federal adjusted gross income, the release said.
"This is way to keep more money in their pocket as opposed to giving it to a government. We’re already running surpluses and therefore, no taxes on tips is going to become the manta in Virginia," Youngkin said Monday during an appearance on Fox News' "America's Newsroom."
The governor's proposal echoes President-elect Trump’s call during his campaign to end taxes on tips. Vice President Harris also expressed support for eliminating taxes on tips during her presidential campaign.
The proposal comes ahead of the start of Virginia's legislative session next month. It would require approval from the commonwealth's General Assembly, and it is unclear if Democrats, who control both chambers, would support Youngkin's proposal.
Next year, Virginia's gubernatorial race will be held, where Lt. Gov. Winsome Earle-Sears, a Republican, is expected to face off against U.S. Rep. Abigail Spanberger, a Democrat.
Several economic experts panned New York Gov. Kathy Hochul’s "inflation refunds" she plans to distribute to qualifying New Yorkers as part of her 2025 State of the State initiative.
Last week, Hochul proposed $3 billion in direct payments to about half of the Empire State’s 19 million residents: $300 for single taxpayers making up to $150,000 per year and $500 for joint filers making twice that.
"Because of inflation, New York has generated unprecedented revenues through the sales tax — now, we're returning that cash back to middle class families," Hochul said in a statement announcing the proposal.
However, some economists and economic experts, like Andy Puzder, said the move simply "redistributes [money] to people so the people will vote for them."
"If you really wanted to help everybody, and if you have an excess of sales taxes, then you reduce the sales tax," added Puzder, the former CEO of the parent company of Hardee’s and Carl’s Jr., CKE Restaurants. "It’s not difficult math," he added.
Puzder is a lecturer on economics and a senior public policy fellow at Pepperdine University who was considered for Labor secretary in the first Trump administration.
In his work at CKE Restaurants, Puzder increased the average franchise sales volume for the then-struggling Hardee’s from $715,000 in 2001 to more than $1 million a decade later.
The U.S. economy has been in trouble because of the same types of policies forwarded by Hochul and other tax-and-spend Democrats, he said – adding that President Biden’s American Rescue Plan was what lit the fuse on nationwide inflation in the first place.
"If you reduce taxes, fewer people will also be leaving the state," he added, as New York shed another population-based House seat and electoral vote in the decennial census.
Puzder noted a few top Democrats have warned their own leaders against such "refunds" from the government, citing former President Bill Clinton’s Treasury chief Lawrence Summers cautioning the Biden administration that similar handouts in 2021 would drive up inflation.
Former Rep. Dave Brat, R-Va., an economist and currently vice provost of Liberty University in Lynchburg, cited Nobel laureate Milton Friedman’s assertion that inflation is a monetary phenomenon.
Therefore, he said, in Hochul’s case, the better fix for inflation lies not in Albany, but in Manhattan.
"Inflation has to do with how much money the Federal Reserve prints. If she wants to give people money back from the government, that’s fine – but she’s in a prominent position in New York in that the Fed has one of its chief desks there and if you want to solve inflation, you go to the Federal Reserve."
He added that $500 for a family is a "trivial, symbolic move against a massive, hidden tax," noting that with an estimated 22% real-inflation rate over the past four years, $500 in 2020 purchasing power is only worth $390.
Brat added that Democrats’ penchant for such "refunds" put Republicans at a consistent political disadvantage because the GOP essentially has to "compete against Santa Claus" handing out presents versus the right warning the public to "eat their spinach."
Economist EJ Antoni echoed some of the sentiment about the refunds being inflationary themselves, saying that what got the U.S. into inflation in the first place was too much government spending.
"So this idea that we're going to add on another government expenditure, you're essentially just creating a feedback loop," Antoni said.
"Now, that's not to say that New York State alone is going to cause inflation. Inflation comes from the federal government, because the federal government is the one that can't create money, can print money out of nothing. But at the same time, you're still talking about increasing the cost of living for New Yorkers, just in a different way," he said.
"Any additional government spending is going to have to be paid for one way or another."
Antoni added he could see such payments to the public "snowballing" into more and more payments down the line, which in turn would lead to higher taxes being needed to fund the handouts.
Antoni also said Hochul’s proposal differs from then-President Donald Trump’s COVID-era checks, because the latter came during a time people needed "money to survive" amid stay-at-home orders and various shutdowns of job sectors.
"If the issue is that we need to reduce people's cost of living, the best way to do that would just be to reduce their taxes, not have another payment by the government," he said.
Fox News Digital also reached out to the left-leaning Brookings Institution for a further diverse viewpoint on Hochul’s move.
Fox News Digital also reached out to Hochul's office for comment but did not receive a response by press time.
California’s unemployment insurance (UI) financing system is facing big deficits, requiring a full "redesign," according to a new report from the state’s nonpartisan Legislative Analyst’s Office (LAO).
The system, meant to be self-sufficient, has fallen short of covering annual benefit costs, resulting in a projected $2 billion annual deficit over the next five years and an outstanding $20 billion federal loan balance.
"This outlook is unprecedented: although the state has, in the past, failed to build robust reserves during periods of economic growth, it has never before run persistent deficits during one of these periods," the LAO report, titled "Fixing Unemployment Insurance" and published Tuesday, stated.
Independent analysts project that annual shortfalls will increase California's federal loan, costing taxpayers around $1 billion in interest each year. The system, which is funded by employer payments to the UI Trust Fund, hasn’t been updated since 1984 and "cannot keep up with inflation or provide the intended wage replacement of half of workers’ wages," according to the report.
The current employer tax structure discourages eligible unemployed workers from claiming benefits, while the state’s low taxable wage base hampers hiring of lower-wage workers, analysts found.
One suggestion researchers wrote to fix the gap is to increase the amount of wages taxed for unemployment benefits, raising it from $7,000 per worker to $46,800. Supporters of this change say it would bring in more money to fund the program. The report also recommends reworking how businesses are taxed for unemployment benefits to make the system simpler and encourage more hiring.
To deal with the massive federal loan, the report suggests splitting the cost between employers and the state government, so that businesses aren’t stuck with all the debt.
"These are significant problems in isolation, let alone in combination," analysts wrote. "The significant changes proposed in this report are an honest reflection of these problems. However, whether or not the Legislature takes action, employers will soon pay more in UI taxes than they do today due to escalating charges under federal law."
Gareth Lacy, a spokesperson for the California Employment Development Department, which administers the state’s unemployment insurance program, called it "a thoughtful report" and noted officials "are reviewing it carefully."
"We agree the issue stretches back for decades and the pandemic compounded it," Lacy told Fox News Digital in a statement.
During the COVID-19 pandemic, the state's UI system was hit hard with an overwhelming number of unemployment claims, resulting in the state borrowing roughly $20 billion from the federal government to cover insurance benefits, which the state still owes.
"Not only will the state’s tax system fall short of repaying that loan, the balance is set to grow due to the ongoing gap between contributions and benefits," the report noted. "This will become a near-permanent feature of the state’s UI program and a major ongoing cost for state taxpayers."
A prominent economist trying to influence the incoming Trump administration's economic policies is facing criticism from conservative groups over his organization's liberal donors and past criticism of President-elect Trump's agenda.
Oren Cass, who previously worked on both of Mitt Romney's presidential campaigns, is the founder and chief economist of American Compass, a conservative think tank that has made inroads with multiple prominent Republican lawmakers in Congress.
Over the past year, Cass' philosophy has reportedly gained traction in some pro-Trump circles, but several conservatives have taken issue with his increased influence and worry his policies will undermine the Trump agenda based on his past anti-Trump comments. During a May 2021 interview, Cass likened Trump to "an earthquake" because he believed Trump was a "disaster in many ways."
"Self-proclaimed ‘conservative’ Oren Cass and his American Compass is not, and will never be, viewed as a legitimate voice in Republican policy circles. CNBC’s Joe Kernen got it right when he called them 'bonkers, walking quacking uniparty progressivism.' And their funding only proves that," Club for Growth President David McIntosh told Fox News Digital.
"As American Compass continues to stay in business thanks to generous donations from radical left-wing organizations like the Hewlett Foundation and the Omidyar Network, Club for Growth is proud to stand with President Trump and the overwhelming majority of Republican voters who support actual conservative policies, like the proposals described in our Foundation’s recent "Freedom Forward Policy Handbook," including: tax cuts, spending cuts to reduce the deficit, deregulation to boost American manufacturing, American-first energy policies, school choice and worker freedom," he continued.
A significant chunk of American Compass' funding comes from a handful of foundations tied to liberal causes, including almost $2 million from the William and Flora Hewlett Foundation and the Omidyar Network, which has provided 11% of American Compass' funding and is led by a founder described as "notable for funding liberal-in-conservative clothing groups that target former president Donald Trump and his supporters."
American Compass is also associated with the "Reimagining Capitalism Partners" fund, which includes the Center for American Progress, Sixteen Thirty Fund-linked Groundwork Action, Progressive Caucus Action Fund, Tides Advocacy and Demos, a socialist think tank.
Cass’ group has also received over $200,000 from the Rockefeller Foundation, a multibillion-dollar foundation that has bankrolled several left-wing causes, including radical environmental groups and "Imagining America," a "coalition of colleges engaged in left-wing curriculum development," according to the Capital Research Center.
The San Francisco Foundation, which has funneled hundreds of millions of dollars to far-left groups, gave $100,000 to American Compass.
When Fox News Digital pressed Cass on his organization's funding and criticism from rival conservative groups, he blasted the "anti-tax zealots" criticizing his organization.
"American Compass advocates for limited government and a commitment to paying for the government that we have rather than leaving the bill to our children," Cass told Fox News Digital. "Anti-tax zealots can lobby for larger deficits if they want, but conservatives are under no obligation to follow them into the fiscal ditch."
In addition to the money that American Compass has received from left-wing groups, its advisory board includes multiple Democrats, including Ganesh Sitaraman, who served as a senior fellow at the Center for American Progress and has been a longtime adviser to Sen. Elizabeth Warren, D-Mass., dating back to her 2012 Senate campaign.
Matt Stoller, the research director at the American Economic Liberties Project, which received at least $500,000 from George Soros’ Foundation to Promote Open Society and at least $230,000 from the Omidyar Network Fund, is also on the advisory board and has donated tens of thousands of dollars to Democrats.
Tom Hebert, the director of competition and regulatory policy at Americans for Tax Reform, blasted Cass as an "anti-Trump activist" in a statement to Fox News Digital.
"The American people returned Donald Trump to the White House with a strong economic mandate: cut taxes, slash job-killing regulations and promote worker freedom. Oren Cass founded American Compass as a ‘post-Trump’ organization and opposes the Trump economic agenda at every level, even calling the landmark Trump tax cuts an ‘expensive failure,’" Hebert said.
"Cass is not a conservative. He’s an anti-Trump activist that MSNBC has on speed dial to undermine Trump’s second-term agenda."
In addition to Hebert’s quote, Americans for Tax Reform published a piece in July with the headline, "Who Said It, Oren or Warren?" The piece pointed to the tax plans of Sen. Warren and Cass’ American Compass, which were both published a month earlier and include multiple quotes from Warren and Cass, asking readers to identify the source of each quote.
"Warren’s plan calls on Democrats to reject extending the Trump tax cuts," the piece says. "The proposed budget released by Oren Cass’ American Compass, which describes itself as ‘the flagship for a healthier and more responsive post-Trump conservative movement,’ calls for the full expiration of the 2017 Trump tax cuts, would increase the corporate rate to the Biden-preferred level of 28%, and backs Warren’s call for a financial transaction tax."
Americans for Tax Reform went on to call American Compass "left-wing" and said Cass was the "leader of the tax-hiking American Compass" in a separate post from earlier this year due to his opposition to Trump’s tax cuts.
Cass was mocked earlier this year after he went on CNBC and suggested that lowering taxes and the corporate tax rate is not "conservative," adding, "There is nothing conservative about that … absolute radical nonsensical notion."
The clip prompted Richard Stern, who serves as the director of the Heritage Foundation's Grover M. Hermann Center for the Federal Budget, to sound off on Cass, saying, "[Cass on] CNBC this morning defending the uniparty's attempt to steal your money and put it in their hands — and to stop capital from flowing to new and small businesses. With ‘friends’ like this, who needs socialists."
During a C-SPAN interview over the weekend, Cass praised some aspects of Trump's first administration, saying the United States "made a tremendous amount of progress" by implementing a "much more aggressive trade policy and confronting China." He also praised the incoming Trump-Vance administration on some of its Cabinet picks, including calling Sen. Marco Rubio, R-Fla., an "excellent" State Department pick because of his work sounding the alarm about China being our "main adversary."
He added he hopes the administration will have a "labor policy that is much more focused on the interests of workers," pointing to Vice President-elect JD Vance's past comments and saying commerce and labor are the "heart of our economic policy."
Despite Cass offering some praise of Trump, he has been a longtime critic of Trump's 2017 tax cuts, calling them an "expensive failure" and saying Trumpism is facing an "inevitable expiration" and adding in September 2020 that Trump is "building no intellectual foundation, no institutional infrastructure and no policy agenda."
After Trump's 2024 election victory, Cass continued to signal opposition to Trump's tax policy.
"Well, I think we have today a politics where both candidates go around talking about how they`re just going to cut everybody`s taxes," Cass told PBS Nov. 10. "And, of course, everybody likes a tax cut. But I don`t think those are the things that are going to turn our economy in a much better direction."
During another interview from earlier this year, Cass said one of the things he thought was "most encouraging" was that there aren't "mini Trumps" and that he is "extremely encouraged" by the post-Trump era Republican leaders he is seeing.
