photo by: Derek Redd

Gov. Jim Justice, with his pet English bulldog Babydog by his side, discusses his proposed personal income tax cut at a town hall Friday at West Virginia Independence Hall in Wheeling.

WHEELING — West Virginia Gov. Jim Justice provided assurance in Wheeling Friday that the state’s budget can handle cutting personal income tax rates in half over the next three years.

Justice’s proposal before the Legislature would cut state personal income tax across income brackets by 50% incrementally over the course of three years — 30% the first year, and then an additional 10% each in years two and three.

Justice — with his English bulldog Babydog — addressed a noon gathering Friday at West Virginia Independence Hall. In attendance were school administrators, city and county officials, and members of the general public.

Those present indicated they liked the idea of the personal income tax reduction.

But Justice was asked if this were possible as the state’s classrooms need teachers, other state agencies are facing hiring issues because of the low pay they offer, there are people living in poverty and the Public Employee Insurance Agency (PEIA) fund needs additional dollars.

Justice said in his proposed budget for the next fiscal year, “there is $100 million for PEIA to keep it solvent going forward.”

There is also money in the budget for aides “to help kids learn to read better,” and “so many things to help the hungry,” he added.

“It’s a very, very legitimate question,” he admitted. “But think of all that’s been accomplished (during the Justice administration) … Do you honestly think that Jim Justice, on my watch, would put our state into any kind of peril going forward … that we wouldn’t be able to continue to do any more goodness for any sector?”

Justice added that not only is West Virginia’s budget not expected “to contract” in the coming years, it’s expected to grow. He explained “there is a need on every street corner for anything and everything,” and state spending isn’t expected “to back away on anything.”

Justice noted that he had asked West Virginia Department of Revenue Secretary Dave Hardy “for real and conservative numbers” upon which to base his tax cut.

Hardy accompanied Justice to Wheeling on Friday, and provided fiscal data to support the income tax reduction as it is phased into the system. He and Justice explained the state has three pots of money in which there are funds to back a 50% income tax reduction.

The first contains a $526 million surplus from fiscal year 2022 that hasn’t been touched; the second, a projected $1.7 billion surplus for fiscal year 2023; and in the third, $677 million in American Rescue Plan Act money to spend on specific projects — such as to improve water and sewer lines.

From the pot containing the projected $1.7 billion surplus for fiscal year 2023, the state has set aside $700 million in a reserve fund to fill the budget if there would be an economic downturn, Hardy explained.

The figures he generated were based on zero economic growth over the next three years.

“We did not build in the economic effect of $100 million going back into everyone’s pocket per month,” he explained after the meeting. “Even though that is real, we didn’t put a number on it.”

He said there is no reason to expect a severe economic downturn in the coming months that would further stun the state’s economy.

Hardy does believe “a mild recession” could take place in 2024, and that is built into the numbers he has provided Justice.

He attributed West Virginia’s surpluses in recent years to revenues from the state’s consumer sales tax, its severance taxes and personal income taxes.

“The severance tax is doing very well. It’s up 113% (for the year),” Hardy said.

State lawmakers also are considering legislation to eliminate vehicle property taxes in the state, which would put an additional $140 million into taxpayer pockets, according to Hardy. He gave assurances the state is in the position to handle both the elimination of the vehicle property tax and the reduction in personal income tax.

“But I’ve always said the governor’s (proposed) income tax is an aggressive cut,” Hardy said. “That’s why we have the $700 million in the reserve fund to be sure that we have money three years from now.”