Hard Stop: Gov. Justice Defends Vehicle Tax Credit
Proposal Offered As An Alternative To Amendment 2
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CHARLESTON -- A tax credit Gov. Jim Justice proposed earlier this week on the vehicle tangible personal property taxes residents and corporations pay to counties annually is receiving pushback from supporters of a constitutional amendment that would allow those same taxes to be eliminated in the future.
Justice announced the Car and All Vehicle Tax Elimination and Protection of Local Government Act during a live-stream event Tuesday. He said the act would provide a dollar-for-dollar refund on vehicle tangible personal property taxes paid to counties by providing rebates paid out of the general revenue budget.
"If (the Legislature) would tell me they're ready to go, tomorrow we could get rid of the car tax and rebate people their money," Justice said during a virtual briefing with the press Friday from the State Capitol Building.
"It could be done maybe in a matter of minutes."
The act was billed by Justice and Revenue Department Secretary Dave Hardy as a simple process, where eligible taxpayers would fill out a form and reimburse taxpayers for the vehicle taxes paid to counties. But a draft bill released by the Governor's Office after Tuesday's announcement paints a different story.
According to the draft bill, the amount of vehicle tangible personal property taxes paid by residents would be returned to them in the form of a refundable tax credit against their personal income tax or corporate net income tax. The refundable tax credit would be retroactive to Jan. 1, 2022. Only taxpayers who are not behind on paying their vehicle taxes would be eligible.
Justice proposed the Car and All Vehicle Tax Elimination and Protection of Local Government Act as a way to encourage voters to reject Amendment 2, a constitution amendment on the Nov. 8 ballot that would give lawmakers the authority to reduce or eliminate six categories of tangible personal property taxes, including vehicles. Republican leaders in the state Senate already have a draft bill to eliminate those tangible personal property tax categories in the 2023 legislative session beginning in January.
"You're going to get your car tax taken so you do not have to pay your car tax. That's off the table now," Justice said. "Now really, your vote on Amendment 2 comes down to just this: do you really want to give up local control and have Charleston take over all your control? Do you really want to pass on the possibility of getting rid of some of your personal income tax that could put dollars right in your pocket and give those benefits to possibly big corporations that are doing very, very well right now?"
According to data from the West Virginia Association of Counties, vehicle tangible personal property taxes make up more than a quarter of the $515.2 million in total real tax dollar assessments for all 55 counties combined in tax year 2021, with $135.8 million in vehicle tangible personal property taxes being assessed that year. It's unclear how much of those assessments are collected each year.
In an interview for the Mountain State Views podcast Thursday, Senate Finance Committee Chairman Eric Tarr, R-Putnam, said that Justice's vehicle tax credit plan was an "unchecked backdoor tax increase."
"If the state's going to turn around and reimburse for the tax you pay, what's to stop (county assessors) from jacking up that assessment entirely as high as they can get it so that this check you get is a bigger check, knowing that you're going to sit there and wait on the government to send you money back for the check you wrote," Tarr said.
"The other way that you actually have a potential tax increase with this is that the federal government would look at that as income to you," Tarr continued. "So, you still have to do federal income tax on top of what you do with the state income tax. At the same time, he's saying this is how he's going to get rid of the vehicle tax, but he's going to phase out the income tax. So, if there is no income tax, then where's the credit?"
Justice had no answers when asked about these specific issues Friday, accusing Amendment 2 supporters of making unsupported claims to oppose his vehicle tax credit.
"We can make up things and say all kinds of stuff, like 'it's going to take you nine hours to get your car tax money back,'" Justice said. "Would you rather change the whole constitution, give all the control to Charleston, take away local control from the counties, run a great big risk, and give great bib benefits to gigantic corporations? Would you rather do that? Or would you rather take nine minutes and not have to do any of the other stuff and absolutely be whole?"
Tarr is one of the crafters of a draft bill that would - if voters approve Amendment 2 -- eliminate tangible personal property taxes on vehicles, machinery/equipment, inventory, computer equipment, furniture/fixtures, and leasehold investments. Instead, the state would compensate counties and school systems with funds from the general revenue budget equal to their annual tax assessments.
A formula in the bill would also provide each county with a minimum of $1 million in addition to receiving funding from the state. The bill also includes a 10% personal income tax cut and smoothing mechanisms for each tax plan. The proposal would return more than $800 million to taxpayers annually.
With the state bringing in a tax revenue surplus in excess of $1 billion in July with the potential to do the same at the end of this fiscal year, Tarr said the time is now to provide tax relief to West Virginians and provide a boost to economic development in the state.
"We have all kinds of cushion to get this right," Tarr said. "This is the time to do it … When we become a state that has no tax on its equipment and inventory, no tax on your motor vehicles, and then you have at least half of our income tax knocked out. If we just get to half of our income tax knocked out and all of that, we'll have one of the best tax structures … to live and raise a family."
Justice is opposed to both Amendment 2 and the Senate Republican tax reform proposal, traveling the state to rally opposition to the amendment. He traveled to Point Pleasant Friday and was in Fairmont earlier this week. Justice will be at Cacapon State Park in Berkeley Springs at 2 p.m. Monday.