Senate President Still Hopeful for Compromise with House in Budget Deal

May 11, 2017

Senate President Mitch Carmichael believes lawmakers are getting close to a budget deal after taking a 10-day recess from the special budget session called by Gov. Jim Justice at the beginning of the month.

The Legislature returned to session May 4 for two days, but when they were unable to reach a compromise, recessed and will return Monday, May 15.

Although the final numbers are still being negotiated, Carmichael said the basis of the budget plan is still the tax reform bill members of the Senate approved on a 32-1 vote May 5.

As approved by the chamber, the bill decreased the number of tax brackets for the personal income tax and lowered the tax rate for each bracket, setting benchmarks for its eventual repeal.

It also increased the sales tax by 1 percent statewide, and restructured the coal severance tax in accordance with a Justice plan that assesses the rate based on the price of coal per ton.

House Speaker Tim Armstead before a floor session during the special budget session.
Credit Perry Bennett / West Virginia Legislative Photography

Members of the House, led by House Speaker Tim Armstead, voted to reject the bill twice last week. In a press conference following the first vote, Armstead said his caucus was “making a clear statement” of their unity against the plan.

But according to Carmichael, that thought in the House might be shifting. Maybe.

The President said his leadership team, their counterparts in the House and the Governor’s Office are working to adjust the personal income tax rates and lessen the proposed sales tax increase to appease apprehension in the House.

“I am very optimistic that our friends in the House will see the value of a pro-growth, pro-jobs, pro-economy proposal,” Carmichael said. “It just astounds me that they wouldn’t.”

Carmichael has previously criticized House leaders for not agreeing to what he says is a Republican ideal—cutting taxes.

Previous iterations of the bill, though, showed out year deficits of hundreds of millions of dollars, essentially buying the state one or two years of positive earnings before returning to a similar budgetary state.

Carmichael fully believes economic growth and job creation generated by the tax reform plan will make up for any of those predicted deficits.

“For the last several years we’ve come in and had these horrible deficits, we’ve had to backfill our budget, and the out years, the projections with no changes in our code look terrible,” he said. “The changes that we’re putting in place will generate the jobs, growth and opportunity to make a better situation.”

“So, you really have a binary choice here, either you stay on the current path which you know is bad, or you make a change which you think is going to be better.”

Senate President Mitch Carmichael gavelling in to a floor session during the 2017 special budget session.
Credit Perry Bennett / West Virginia Legislative Photography

The negotiated version of the bill will not include heightened requirements to reassess taxes once they have been cut like previous version, according to Carmichael.

Other states in the recent past have cut taxes and implemented strict assessment rules, like requiring a vote of the people or a super majority to create or raise a tax, which has resulted in major deficits. Carmichael said those types of measure will not be in this bill.

“We’re not going to lock ourselves in like Kansas and Oklahoma did. We’re providing ourselves some flexibility,” he said.

Carmichael added those states also missed a key piece to the personal income tax repeal process, resulting in their current budgetary difficulties: they did not reduce government spending.

“West Virginia spent $4.3 billion last year, and the Senate and the Governor are committed to not spending any more,” he said.

The compromises, which have largely been agreed to by Democratic members in both chambers, have drawn criticism from outside groups, though, like the West Virginia Center on Budget and Policy.

Under the leadership of Executive Director Ted Boettner, the group has penned several op-eds and blog posts calling the plan a “bad deal for West Virginia.”

The group maintains the restructuring of the income tax places a larger burden on low income and working West Virginians, while giving a hefty tax break for the top 20 percent of earners in the state.

That paired with an increased sales tax, which Boettner has previously testified before lawmakers burdens low income families because they spend a higher portion of their wages on goods, results in a regressive policy.

Lawmakers are scheduled to return to Charleston Monday. Carmichael said he’s “optimistic” they will have an agreement by then.

“I think we’ll get this done,” he said.