Gov. Justice Unveils Yet Another Personal Income Tax Reduction Plan, But Progress On Issue Remains Elusive
On Day 55 of the West Virginia Legislature’s 60-day session, Gov. Jim Justice gathered top lawmakers of both parties to try to hash out the differences between three very different plans to reduce the personal income tax. Instead, the governor offered up another version of his plan before lawmakers chimed in — and consensus on the issue remained elusive.
Billed as a way to urge lawmakers to agree on what has been, to date, a stalemate, the governor's "summit" began with Justice critiquing the plans put forth by the Republican-led House and Senate.
“I do not agree with the House plan from the standpoint that it takes a long, long time,” Justice said of House Bill 3300, as passed by the lower chamber last month.
Under that plan, the personal income tax reduction would take place over the course of roughly 12 years and would reduce revenue by at least $150 million year over year — totaling more than $2 billion in lost revenue upon full implementation. The proposal from the House offers no new sources of revenue.
Justice said the House plan would not effectively entice people to move to West Virginia — one of his stated motivations in reducing the personal income tax.
“I think from the Senate side, they went big enough,” Justice said, noting, however, that he sees certain tax hikes as burdening the wrong parts of the population.
A strike-and-insert amendment to House Bill 3300 — adopted by the Senate Finance Committee and slated for a vote in the full Senate with amendments pending Tuesday — differs greatly from the House plan, but also departs from Justice’s proposal that was announced last month.
Under the upper chamber’s plan, there would be increases to the consumer sales tax from 6 percent to 8.5 percent, the reinstatement of the food tax at 2.5 percent and a new hotel occupancy fee, among other revenue increases.
“My plan did just this — it tried to make every single living, breathing West Virginian cash-positive,” Justice said, arguing that his original plan took on what he called the “Charleston swamp.”
But those words from Justice, as he acknowledged disapproval from some business groups and lobbyists, served as a pivot. Justice then unveiled a brand new set of ideas on tax reform — with some aspects of his original plan remaining intact and others dramatically changed.
After passing out literature to lawmakers on the stage, the governor announced a new proposal he called the “Justice 4 All” income tax plan. He then explained the latest iteration of his plan, moving the personal income tax reduction down to 50 percent (it was a 60-percent reduction in his original plan).
Under Justice’s new plan, the consumer sales tax would still jump from 6 percent to 7.9 percent. Proposed increases to beer, liquor and wine that were included in Justice’s original plan would be eliminated, the governor said.
After the governor introduced his new plan, lawmakers began to speak up and offer their own thoughts on the various proposals.
“One of the principal concerns that the members of the House always debate at length is how any proposed plan would differentiate West Virginia from neighboring states specifically as it relates to the border-county issue,” said House Speaker Roger Hanshaw, R-Clay.
After a somewhat extended back and forth with Justice about concerns over border
counties, Senate President Craig Blair, R-Berkeley, said he would get behind the governor’s new plan.
"I'd vote for this in a heartbeat — and I do believe what you've got here is an improvement,” Blair said about Justice’s latest set of ideas.
“Are we prepared to do this today? No,” said Blair, signaling his eagerness to find compromise. “But maybe tomorrow. The sooner the better.”
Senate Finance Chairman Eric Tarr, R-Putnam, questioned why the governor’s plan had focused on taxes on coal and gas, when he sees President Joe Biden’s proposed policies on natural resources as a potential hindrance.
“There is concern within the Senate of using volatile and less predictable taxes to offset a reduction in a very stable revenue source,” Tarr said, noting that the Senate plan didn’t consider severance taxes on natural resources.
Justice responded by saying that his plan didn’t hinge on severance taxes as much as it does economic growth. The governor took issue with the Senate’s plan to reinstate things like the food tax.
“The biggest thing that I think the Senate plan will be a tremendous obstacle is just this — like it or not like it — it puts an incredible burden back on those that are struggling the most. They're going to perceive it that way,” Justice responded.
House Finance Chairman Eric Householder, R-Berkeley, said he was giving the governor “the way out” with the plan that has already passed the lower chamber.
“The House, right now, has the common-sense approach — a moderate approach — that doesn't wreck the West Virginia economy,” Householder said. “And it burdens no one. Yes, it may take 12 years. But I think it's a more common-sense approach.”
It was nearly an hour and a half into Monday’s summit before Justice heard from Democrats — whose small numbers in the House and Senate have been able to offer little influence on legislation this session.
House Minority Leader Stephen Baldwin, D-Greenbrier, applauded Justice for bringing members of the two parties together — and for championing the tax rebates for low-wage earners included in the both of the governor’s plans, including the new “Justice 4 All” proposal.
Baldwin also asked Justice what cuts to the state budget might be included under the new plan, including $25 million of funding to programs that have not yet been identified.
“I heard you talk about the potential cuts over time in the House plan,” Baldwin said. “We've obviously seen what the potential cuts are — in terms of the Senate plan for the budget moving forward — which I think are some pretty important things to you. So what might those look like?”
Justice said he had met with Tarr about potential cuts that would reel back wasteful spending, that the governor said would be “easy.”
“Now, I don’t really know what they are. And, you know, we'll have to all look at that and see what they are,” he said.
House Minority Leader Doug Skaff, D-Kanawha, also thanked Justice for the opportunity to speak at the summit, and said he is open to the idea of reducing the personal income tax. However, Skaff said things felt too rushed and he made it clear that consensus wasn’t there yet.
“I question the sense of urgency today that we have to hurry up and do this. I'd be all for us meeting numerous times, through the next few months through the whole summer,” Skaff said. “Let's get this right. Let's do it right, let's take part of the Senate's plan, part of the House plan, your plan — let's get this right.”
“I know we've only got five days left — and we can talk about this for 500 years,” Justice said in closing out the two-hour summit. “But it takes a lot of effort from everybody. I have given you every single thing in my soul to try to get us across the finish line.”