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West Virginia lawmakers react to Justice proposal eliminating personal income tax

Senate Minority Leader Stephen Baldwin listens to committee testimony during a Senate Finance Committee Meeting. (Photo Provided)

CHARLESTON — As Gov. Jim Justice prepared to meet with lawmakers Friday to sell his personal income tax cut and tax increase plans, leaders of the Legislature’s two finance committees said they were keeping an open mind on Justice’s proposals.

Justice released details and draft bill language Thursday for a one-year 60 percent cut in most personal income tax classifications along with a $52 million tax rebate for families making less than $35,000 per year. The total tax reductions total more than $1.087 billion.

The Justice tax reform plans also includes $902.6 million in proposed tax increases, including a 1.9 percent increase in the consumer sales and use tax; removal of sales tax exemptions on certain professional services; a tax on certain luxury goods; tiered rates for coal, natural gas, and oil severance taxes that increase as the prices for those fossil fuels increase; and increased taxes on cigarettes, tobacco products, e-cigarettes, beer, wine, liquor, and soda.

Speaking Friday from the State Capitol Building in Charleston during his fourth virtual town hall promoting the tax reform plan, Justice said West Virginia needs to do something big to not only reverse the exodus of residents from the state, but incentivize people to move to West Virginia to live, work, and play.

“We’ve tried to incorporate in our plan a way, a methodology, that gets rid of our personal income tax in the State of West Virginia and drives opportunity to this state beyond belief,” Justice said. “Over and over and over, we have struggled with trying to generate population growth in West Virginia. This will do it.”

House Finance Committee Minority Chairman Brent Boggs takes part in a meeting. (Photo Provided)

According to the U.S. Census Bureau, West Virginia was the only state to lose population between 1950 and 2016 when looking at population growth, losing approximately 500,000 residents during that time period.

“The whole world is looking at West Virginia today because of how we’ve handled the pandemic from the standpoint of economics, health and safety … now is the time to genuinely drive population growth to West Virginia,” Justice said. “We’ve got to find a way to move the needle in a positive way.”

The reduction in personal income tax revenue combined with the tax increase revenue still creates a $185.1 million funding gap. Justice proposed a $25 million cut in the state’s general revenue budget, along with $10 million in possible savings from retiring state employees and $60 million in estimated annual revenue growth, could reduce that hole to $90 million.

The first look many lawmakers had at Justice’s proposal was the abstract and draft bill language released Thursday. Justice said the bill has been submitted to the Legislature, but probably won’t be formally introduced in the House of Delegates and state Senate until next week.

Once introduced, the Legislature’s two finance committees will have to review the proposed bill. Both committees have been hard at work holding hearings with state agencies as the general revenue budget for fiscal year 2022 comes together. Justice said he has reached out to lawmakers in both parties for feedback the last two weeks as the plan came together.

House Finance Committee Chairman Eric Householder chairs a meeting earlier this week. (Photo Provided)

Senate Finance Committee Chairman Eric Tarr, R-Putnam, said he was pleased with what he has seen of the Governor’s tax reform proposals. He said, while not perfect, the bill is a good starting point for discussing a personal income tax phase-out — long a goal of Republican lawmakers.

“If we can’t get perfect, what can we get out there that allows us to continue to craft something that gets toward a more perfect model in the years to come? Right now, if you knock out 60 percent of the personal income tax, that’s probably one of the best scenarios I’ve seen to try to do that. I appreciate (Justice’s) leadership on it.”

Senate Minority Leader Stephen Baldwin, D-Greenbrier, is also a member of the Senate Finance Committee. He said Justice’s plan reminds him of the Governor’s 2017 plan to close a nearly $500 million budget hole with increases in the consumer sales tax, a business and occupation tax, and a wealth tax. The Republican-led Legislature rejected that plan from Justice, then a Democrat.

“I think it’s very complicated,” Baldwin said. “I remember in 2017 we dealt with a very similar package, and it just sort of fell apart and it sort of collapsed under its own weight because it was so complicated. This seems very much like that.”

With only 34 members in the state Senate and 23 Republicans, Justice has fewer votes to wrangle in the upper chamber. On the House side, Justice has 100 members to convince, including 77 Republicans. House Finance Committee Chairman Eric Householder, R-Berkeley, said he was supportive of a personal income tax repeal, but the other proposals in the plan will need reviewed by the Republican caucus.

Senate Finance Committee Chairman Eric Tarr listens to agency testimony during a budget hearing. (Photo Provided)

“I do applaud the Governor for getting his thoughts on paper while it is in a framework position right now. It’s going to be a heavy lift, make no mistake about it,” Householder said. “I’m going to present the bill before our caucus, and we’ll see which way the caucus wants to go … It’s all really going to depend on the mood of the caucus and what direction that we want to go.”

House Finance Committee Minority Chairman Brent Boggs, D-Braxton, is the former chairman of the committee prior to 2015 when Democrats held the majority in both chambers. Boggs said he planned to keep an open mind on the Justice plan, with the caucus likely meeting with Justice as early as Friday afternoon to discuss the plan.

“Obviously everybody likes to get on the tax cut train, but this is going to be a tax cut on one hand and a tax increase on the other hand, the magnitude of yet which we don’t really fully comprehend because we have an outline,” Boggs said. “I think our caucus is going to keep an open mind about this, listen to what the Governor has to say, listen to what the affected parties have to say, and go from there.”

Steven Allen Adams can be reached at sadams@newsandsentinel.com

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