(The Center Square) – Virginia dropped from 22nd place to 32nd in the 2025 edition of Rich States, Poor States, a national economic outlook report released Tuesday by the American Legislative Exchange Council.
The annual ranking evaluates states based on 15 forward-looking policy measures tied to tax rates, government spending, and labor policies. This year’s drop ties Virginia with Mississippi for the steepest decline in the country.
“Virginia is becoming more uncompetitive with personal income tax as other states cut and Virginia’s stays the same,” the report states.
Virginia received no boost from recent legislative changes – ALEC ranks the state 37th in that category. It also reported a rise in debt service, now at 5% of total tax revenue, placing Virginia 33rd nationally for that metric.
Property tax burdens remain high, ranking 31st, and overall tax burdens rank 36th. ALEC says this combination discourages investment and job creation.
Despite retaining its right-to-work status – ranked first by ALEC for promoting labor flexibility – Virginia lags in several other areas the report prioritizes for economic competitiveness. The state’s top marginal personal income tax rate remains at 5.75%, a level unchanged since 2005, despite a growing trend among other states to reduce or eliminate income taxes altogether.
Virginia applies this top rate to all income above $17,000, which ALEC says creates a disincentive for upward mobility and job growth.
Virginia’s debt service costs – now consuming 5% of tax revenue – also drew attention in the report, which ranked the state 33rd in this category. ALEC warns that rising debt obligations can limit long-term budget flexibility and crowd out spending on priorities like infrastructure and education.
The report also flagged Virginia’s population loss, ranking the state 39th in culmative domestic migration from 2014 to 2023, with a net loss of more than 146,000 residents. ALEC interprets this trend as a sign that individuals may be relocating to states with lower taxes or more favorable business climates.
While Virginia’s total population has continued to grow – reaching 8.8 million in 2024 – the report focuses on net domestic migration, which tracks how many residents moved into or out of a state compared to others. This metric showed Virginia losing more residents than it gained over the past decade, a trend ALEC links to tax burdens and the business climate.
Neighboring states like North Carolina and Tennessee, which ranked in ALEC’s top five for economic outlook, have pursued aggressive tax reforms and seen stronger population and job growth in recent years.
