Business Leaders Balk at Tax Reform Plan
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CHARLESTON -- Gov. Jim Justice went into overdrive Thursday to gain public support for his plans to reduce the personal income tax rate and raise other taxes as state and national business groups push back against the proposals.
During an impromptu virtual town hall Thursday evening with barely seven hours' notice, Justice accused lobbyists for business interests of trying to sabotage his tax plan.
"You're going to see an orchestrated effort in the days ahead … by those who are out there who are absolutely probably thinking in my mind 'pennywise and pound poor.' They're good people, but they're thinking selfishly," he said.
"You have lobbyists circling around everywhere because no one wants to give a little bit," Justice continued. "We do not want to be run by the lobbyists … are the lobbyists and are the money going to continue to run all of us all the time? It's a swamp completely overtaking us all."
The West Virginia Business and Industry Council, a special interest group consisting of 50 trade associations and businesses, wrote a letter to lawmakers Wednesday asking them to carefully consider the effect of Justice's tax plans on businesses throughout the state.
"We applaud Governor Justice's initiative to do all he can to make West Virginia the most attractive state in the nation to live and work, but our members have concerns over the impact this income tax plan will have on every West Virginian and West Virginia business," wrote Mike Clowser, chairman of BIC.
"We all agree the elimination of the personal income tax is a laudable goal, but BIC members believe there needs to be study, debate, and public input in order to develop a comprehensive tax restructuring plan," Clowser continued.
"There's no mention in this at all that all West Virginians will end up cash-positive," Justice said in response to the BIC letter. "I wouldn't have done it any other way. There's no way on Earth I would have let the low-income wage earners carry the burden of this."
House Bill 2027 and Senate Bill 600, the Governor's tax plan, was introduced Tuesday in the House of Delegates and state Senate. Under Justice's proposal, personal income tax rates would be cut by 60 percent starting in July for fiscal year 2022.
The tax cut would affect income earned from wages and salaries, pensions, annuities and IRAs, Social Security, and unemployment.
However, the personal income tax cut would exclude income from Schedule C business profits; Schedule E rents, royalties, and pass-through entity profits; Schedule D capital gains; Schedule F farm income; supplemental gains and losses, taxable interest income, dividend income, and miscellaneous income.
According to Ryan Maness, a senior policy analyst and tax counsel for government relations association MultiState, wrote in a blog post that only cutting personal income tax rates on some forms of income and not all amounts to a "phantom cut."
"Assuming that this definition of 'business personal income' encompasses the entirety of state business' liability under this tax, West Virginia employers would receive no tax benefit at all from this proposal," Maness wrote. "In other words, it is likely that the $100 million personal income tax cut identified above is a phantom cut that will not be effectuated."
"The proposal reduces the personal income tax obligation of an individual wage earner based on their income level but does nothing to benefit a business," Clowser agreed. "The majority of West Virginia businesses are operated as sole proprietors, limited liability companies, limited partnerships, or general partnerships. As we understand the proposed legislation, owners of these businesses will see no benefit from the plan."
In response, Justice said eliminating those additional personal income taxes that affect business owners is a long-term goal.
"We're going to eliminate taxes on our businesses … as well," Justice said. "We're on a pathway right here that could absolutely substantially benefit and draw all kinds of businesses to West Virginia."