Differences of opinion on West Virginia tax reform arise
A downpour of rain hits the State Capitol Building in Charleston Friday afternoon. (Photo by Steven Allen Adams)
CHARLESTON — While there is support among Republican lawmakers for tax relief for West Virginians, Gov. Jim Justice will have to persuade the GOP-led Legislature that his plan for a 10% personal income tax cut is the best way to go.
Justice announced plans Wednesday to call a special session at the end of the month and introduce a bill that would provide an aggregate 10% cut to West Virginia’s five personal income tax rates retroactive to Jan. 1. The plan would cost more than $250 million and would be a permanent tax cut going forward.
“We need to get money back into people’s hands today,” Justice said Friday morning during a virtual briefing with reporters at the State Capitol Building. “We absolutely need to as a state … to get on the move to let the world know that West Virginia is on a pathway to reducing and eliminating the personal income tax.”
But several lawmakers in legislative leadership, speaking on background, said they were taken by surprise by the governor’s plan, having received no heads-up prior to Wednesday’s announcement. Some were also surprised that the plan closely resembles a similar plan that passed the House of Delegates earlier this year but never was taken up by the state Senate.
Justice said he was having a meeting later Friday regarding his personal income tax plan, though it was unclear if this was a meeting with his staff or lawmakers. The office of House Speaker Roger Hanshaw, R-Clay, said he was not part of any meeting Friday. Neither was Senate President Craig Blair, R-Berkeley, who had reached out to the governor’s office for a meeting Friday but nothing materialized.
The governor’s plan is similar to the 10% personal income tax cut in House Bill 4007, introduced during the 2022 legislative session by House Finance Committee Chairman Eric Householder, R-Berkeley. The bill passed the House 76-20 along party lines but was never taken up by the Senate.
Speaking in his office Friday afternoon, Blair said the Republican Senate caucus made its position clear on HB 4007 by not taking it up earlier this year.
While supportive of cutting and later eliminating the personal income tax, Blair said his priority is making sure an amendment on the November ballot that would change state constitutional language to allow lawmakers to reduce or phase out property taxes passes.
“The vast majority of our caucus is in support of doing the personal property tax first, because when the people vote for that in November, it comes with an expectation that the personal property tax on their vehicles comes off,” Blair said. “We’re going to deliver on that and have been preparing to deliver on that for the last four years.”
Instead of a personal income tax cut, Blair said he supports providing a rebate to taxpayers on their vehicle property taxes. Such a rebate would cost $150 million instead of the $254 million cost of the 10% personal income tax cut. It would also give voters a taste of what to expect if they vote for the constitutional amendment in November and lawmakers can make changes to certain property taxes in 2023.
“It’s 100% West Virginians that own those,” Blair said. “Why not rebate that back to them for whatever the last personal property tax year that they paid? If you spent $1,000 on your vehicles, then you get $1,000 back. If you spent $200, you get $200 back.”
The constitutional amendment, if approved by voters, would give lawmakers the authority to lower or eliminate personal property taxes on machinery and equipment, furniture and fixtures, leasehold investments, computer equipment, inventory and vehicles. The revenue from these taxes go to county governments and county boards of education.
According to the West Virginia Association of Counties, the county real tax dollar assessments for those six property tax streams was more than $515 million in tax year 2021, though it is unclear how much of that assessment was collected by counties.
Blair said by keeping the general revenue budget flat and factoring in natural tax revenue growth, the state would be able to cut those property taxes and keep counties whole. Future tax revenue growth through other streams would allow for future legislatures to consider phasing out the personal income tax.
“If we do play our cards right, that can happen long into the future, but we’ve got to be able to be mindful of our government,” Blair said. “We have to keep finding the efficiencies and making it so that people want to live here, make our students that graduate from here want to live here, make babies here and then have job opportunities for them. The personal property tax addresses that personal income tax.”
Justice believes his personal income tax plan has more appeal to West Virginians than a rebate on vehicle personal property taxes. He accused opponents of his plan of political ambitions, calling changes to property taxes the “wrong move.”“All of us want to do all of these things, but is there anything today that has the appeal that lowering your personal income tax has? There’s no way,” Justice said. “We’re telling our counties and all the folks we’re going to underwrite all of this. What if things get really tough? Right now, our counties have a guaranteed income stream. We’re going to give that up and bet on the come and bet on what is about to happen? We don’t know what is about to happen.
“This is the move we ought to make,” Justice continued. “If they don’t want to do it, they don’t want to do it. But it’s a big-time wrong move and politically driven in lots and lots of ways. You don’t have that with me.”
Blair rejected the assertion that Republican efforts to phase out certain property taxes was about political ambition, pointing to a stack of books on his desk detailing Republican legislative efforts to improve the economy of the state since taking the majority in 2015.
Multiple tax reform commissions under both Democratic and Republican governors have recommended eliminating the machinery/equipment and inventory property taxes over the last 25 years. Blair said eliminating those taxes will be the culmination of long-term efforts to improve the economy instead of chasing short-term gains.
“We’re not looking at the hood ornament; we’re looking way down the highway to our destination,” Blair said. “We know the final destination, and that is prosperity for the people of West Virginia. All people.”
Justice has nearly 15 days to convince lawmakers to pass his personal income tax cut before a special session would coincide with legislative interim meetings beginning Sunday, July 24.
“At the end of the day, if (the Legislature ) says they don’t want to do that, then that’s all on them,” Justice said. “All I can do is bring the horse to water.”
Steven Allen Adams can be reached at firstname.lastname@example.org