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West Virginia Lawmakers React to Justice’s Tax Reform Proposal

Photo Courtesy of W.Va. Legislative Photography House Finance Committee Minority Chairman Brent Boggs, D-Braxton, makes remarks during a floor session this week.

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.”

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 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.

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.

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.”

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