Virginia is bringing in more tax money than expected — and a big chunk of it is coming from an unlikely source: the massive data centers humming away across the state. For families watching every dollar, what happens with this revenue windfall could shape public services, school funding, and the state budget for years to come.
The Commonwealth collected $141 million more in general fund revenue than projected in October alone, pushing the state a full $394 million ahead of its revenue forecast just four months into the fiscal year, according to the state’s October revenue report. Total collections through October reached $10.47 billion — up 7.7% from the same stretch last year and nearly 4% above what budget planners had anticipated.
A New Tax on Tech Is Paying Off — Big
One of the most significant drivers behind Virginia’s revenue surge is a new tax on the energy that data centers consume. These massive facilities — which power everything from cloud storage to artificial intelligence — use enormous amounts of electricity, and Virginia is now collecting a tax on that consumption.
In October alone, the data center energy tax brought in $66.5 million, accounting for roughly half of the month’s revenue growth compared to the same time last year. Through the first four months of the fiscal year, Virginia has collected $91.4 million from the tax, and the state projects it will generate $600 million by June 30.
That’s real money that could flow toward priorities that affect everyday Virginians — from road repairs and school budgets to healthcare programs.
Corporate and Income Taxes Also Surging
Beyond the data center levy, corporate income taxes posted a dramatic jump. Virginia collected $90 million in corporate income tax in October, compared to just $8.3 million during the same month a year earlier. Through October, corporate tax receipts totaled $666.4 million — a 77.8% increase year over year.
Taken together, corporate income taxes and individual income taxes paid outside of regular paycheck withholding generated $328 million more than expected, making up roughly 83% of the total surplus above forecast.
Sales tax collections — a good indicator of consumer spending habits — also rose 3.9% for the month and were up 7.4% for the fiscal year so far, suggesting that Virginians are still spending, even as many households feel the pinch of persistent inflation.
Not Everything Is Up
It wasn’t all positive news. Payroll withholding — the tax taken directly out of workers’ paychecks and Virginia’s single largest revenue source — fell 4.6% in October compared to a year ago, a drop of about $72.8 million for the month. That dip is worth watching, since wages and employment levels directly reflect how working families are faring financially.
Even so, withholding collections remained 3.6% higher across the first four months of the fiscal year, and net individual income tax revenue was still up 4.4% for the year to date, despite a 3% decline in October.
Virginia’s Finance Secretary Mark Sickles offered an encouraging read of the numbers, while also urging caution going forward.
“October revenues came in $141 million above forecast, and every major tax source except recordation is running ahead of expectations for the year. That’s a great place to be heading into the budget cycle,”
Sickles said in a statement.
At the same time, Sickles cautioned that corporate income taxes and payments outside payroll withholding are among the state’s most unpredictable revenue streams. He noted the stronger numbers could justify lifting revenue projections but said the administration would proceed carefully as it prepares the next two-year budget — pointing to ongoing inflation and the possibility of a Federal Reserve interest rate increase in December as reasons for restraint.
How Does This Compare to Recent Years?
Virginia’s current fiscal performance is strong, but it’s worth noting the state was actually even further ahead of forecast at this same point in each of the two prior fiscal years. Through October 2025, general fund collections were $497 million above forecast. The year before, October 2024 figures showed collections running $403.3 million ahead of projections.
September collections also beat expectations, rising 8% from the same period a year earlier, helped by quarterly corporate and nonwithholding tax deadlines that exceeded forecasts.
Virginia also closed out the last full fiscal year on a high note. According to preliminary figures released in July, general fund collections surpassed projections by $936.3 million after growing 6.7%, driven largely by individual income and sales taxes. The state folded $585.5 million of that surplus into the starting balance for the current budget cycle.
What Families Can Expect Next
Gov. Abigail Spanberger tied the revenue results to broader concerns about household finances, emphasizing her focus on protecting everyday Virginians from outside economic pressures.
“With the war in Iran and reckless policies out of Washington burdening Virginians, my focus continues to be on saving money for families and protecting the long-term strength of our economy,”
she said in a statement.
Earlier this week, Spanberger and Democratic legislative leaders unveiled their Moving Virginia Forward agenda for the 2027 legislative session. The proposals include measures to forgive medical debt — a significant burden for many working families — and steps to address rising housing costs, two issues that sit at the top of kitchen-table concerns for Virginia households.
For now, the state’s economic development picture looks encouraging, but how leaders choose to deploy this revenue will ultimately determine whether the gains translate into real relief for the families who need it most.