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West Virginia Governor Jim Justice Calls for Repeal of State Income Tax During State of the State Address

Photo courtesy of W.Va. Legislative Photography Gov. Jim Justice addresses the West Virginia Legislature during his State of the State Address on Wednesday night. Justice unveiled an ambitious tax reform plan during the speech.

CHARLESTON — Gov. Jim Justice laid out an ambitious agenda to lawmakers Wednesday during the first State of the State address for his second term as governor of West Virginia, including a phase-out of the personal income tax.

“We are on the launch pad right now. In fact, we’re airborne right now,” Justice said. “And that’s why tonight, I am asking all of you to join me to repeal the income tax in the State of West Virginia.”

Justice proposed lowering the personal income tax by one-half for earners below a certain income and by one-third for residents above a certain income level.

To help ease the phase-out, Justice wanted to create a tiered severance tax for coal, oil, and natural gas, raise the consumer sales and use tax by 1.5 percent, increase taxes on tobacco and soda, remove tax exemptions for professional services, create a wealth tax, and make $25 million in cuts in state government.

“Here’s how you do it. First of all, you take one bite of the elephant at a time, a big bite,” Justice said.

“This is an opportunity beyond all comparison … the opportunities are there. It’s entirely up to you. My ideas surely can be tweaked. I will listen to any and everybody absolutely. I’ve given you a pathway, a pathway to eradicate our income tax.”

During the last fiscal year, the personal income tax brought in more than $1.9 billion and accounted for 43 percent of tax revenue for the General Revenue Fund. More specifics on how the phase-out would work and the associated tax increases will be released over the next several days.

Justice presented his budget for fiscal year 2022 — beginning in July — to House Speaker Roger Hanshaw, R-Clay, and Senate President Craig Blair, R-Berkeley. Both Blair and Hanshaw said they were more than willing to work with Justice on his proposals.

“Tonight, the Governor made it clear that West Virginia’s time to take bold steps to secure our future is right now,” Blair said. “We now must take the next step, and that step is removing our state’s personal income tax.”

“We’ve spent a lot of time in the past five years looking at our civil justice system and our connectivity, and now it’s time to look at our tax structure,” Hanshaw said. ”

The new general revenue budget is flat at $4.569 billion, which is $5 million less than that $4.574 billion general revenue budget hammered out between Justice and the Legislature last March. Justice said he would present flat, no-growth budgets for the remainder of his four-year term.

The budget also uses no money from the state’s two Rainy Day funds for the third straight year in a row. Rainy Day funds A and B have a combined $930 million. Justice called for the creation of a third Rainy Day Fund to help cover possible shortfalls as the personal income tax is phased out.

For economic development, Justice asked the Legislature to help him use between $30 million and $50 million to entice out-of-state businesses to close and move to West Virginia. Justice also proposed a corporate net income tax break to help recruit remote workers to live and work in West Virginia. Intuit CEO Brad Smith, who launched a prosperity hub in downtown Bluefield in 2019, is helping advise Justice.

“I have a bill in front of you to propose the attraction of remote workers to West Virginia,” Justice said. “It’s a fundamental change and a modernization in how we look at corporate tax and the corporate tax structure in how we move towards making West Virginia attractive for remote workers. We want to do it.”

To help better promote the state, Justice wants to move the West Virginia Development Office and the Division of Tourism to cabinet level positions. Tourism Commissioner Chelsea Ruby has been with Justice since 2017, while new WVDO Executive Director Mitch Carmichael was appointed last week. Both agencies are within the Department of Commerce.

Normally an affair with much pomp and circumstance, Wednesday’s State of the State address was more somber due to nearly a year of dealing with the COVID-19 pandemic. When Justice last spoke to a joint session of the Legislature last January, COVID-19 was only just making headlines.

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