Justice: Expect special session by end of September for tax cut
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CHARLESTON -- Despite concerns raised last week by some Republican lawmakers about whether West Virginia can afford it going into 2025, Gov. Jim Justice said Wednesday that he will announce Monday a special session to consider an additional 5% personal income tax cut by the end of September.
Speaking Wednesday afternoon on his weekly administrative briefing from the State Capitol Building, Justice said his office was continuing to negotiate with leaders in the West Virginia Legislature for a special session that will include the 5% cut in personal income tax rates beginning Jan. 1, 2025, on top of another 4% cut.
"I want to announce now that Monday we're going to continue to work. We want to do this, for crying out loud," Justice said. "Truly we've had plenty of time to work out our differences in regards to a potential tax cut."
Justice first proposed a 5% additional cut in personal income tax rates in July following the end of fiscal year 2024. It would return approximately $115 million to taxpayers if approved by lawmakers.
West Virginia ended fiscal year 2024 on June 30 with more than $5.7 billion in tax collections for the general revenue fund, which was 16.9% more than the $4.9 billion estimate set by the state Department of Revenue. The fiscal year ended with a $826 million surplus.
According to the Department of Revenue, the state has $562 million in unappropriated surplus from the end of fiscal year 2024 after expenses and $80 million in unappropriated monies for the current fiscal year. The state also has less than $400 million in the personal income tax reserve fund set aside to deal with potential economic issues caused by future tax cuts. Justice said the state can afford an additional 5% personal income tax cut.
"There is a way, absolutely, to take the dollars of surplus we have right now," Justice said. "I've given (the voters) my word that I'm going to propose that and call people back into special session ... we've got to get something done.
"Hoarding this money and keeping it for pet projects or whatever it may be down the road I don't think is a good idea," Justice continued. "I don't really believe in my heart that everybody wants to do that. Let's come up with something that is genuinely good for our people, especially during a time when inflation is eating everybody's lunch."
House Bill 2526, passed during the 2023 legislative session, cut personal income tax rates by 21.25%, returning approximately $483 million to taxpayers. That number doesn't include the additional cuts in HB 2526, including the tangible personal property tax rebate on motor vehicles and other tax breaks.
Also included in that law was a trigger formula for further reducing personal income tax rates every calendar year. HB 2526 limits the maximum cut that can happen in a single calendar year to 10%. Beginning this August and every August thereafter, the Department of Revenue determines the percentage of the personal income tax cut by comparing general revenue collections in a previous fiscal year minus severance tax collections compared to the base year of fiscal year 2019 and tied to the non-seasonally adjusted consumer price index.
Revenue officials announced in July and certified in August a 4% personal income tax cut based on the formula and trigger, which will return approximately $92 million to taxpayers beginning in January 2025. But lawmakers have been reluctant to publicly support an additional 5% cut, with some lawmakers publicly questioning the wisdom of such a decision.
Senate Finance Committee Chairman Eric Tarr, R-Putnam, questioned Department of Revenue Deputy Secretary Mark Muchow during a meeting of the Joint Standing Committee on Finance last week about whether the state could afford an additional 5% personal income tax cut given some of the expenses that could affect future budgets. Personal income tax revenue of $2.24 billion made up 39% of the state's total tax collections in fiscal year 2024.
"If there's further discussion that's had about accelerating a tax cut beyond the economic growth of the State of West Virginia with those expenses in mind, could you bring that explanation or have somebody from the Governor's Office bring that explanation to this committee at some time before session?" Tarr said.
Justice said he is willing to hear the ideas of lawmakers on how to make the 5% personal income tax happen, including increasing funding for the personal income tax reserve fund. Lawmakers will be in Parkersburg this Sunday through Tuesday for traveling September legislative interim meetings.
"We've had plenty of time to put together and craft some form of additional tax cut," Justice said. "We're absolutely just kicking the can down the road. I'm telling you now on Monday I will announce our special session before the end of the month. I'm giving everybody, again, additional time to get together between now and Monday. Let's come to a resolution rather than just continue to kick the can."
Steven Allen Adams can be reached at sadams@newsandsentinel.com.