Photo courtesy of WV Governor's Office Gov. Jim Justice said he would be willing to cut state spending in order to achieve another personal income tax cut.

CHARLESTON – Gov. Jim Justice said Wednesday that he would be willing to discuss cuts to current state spending levels in order to pay for an additional 5% personal income tax cut, though only if lawmakers present him a proposal to do that during the upcoming special session.

“Absolutely,” Justice said Wednesday morning during his weekly administration briefing from the State Capitol Building. “If they can come to me with something that they would propose that would basically cut things and everything, then we’ll look at it.”

Earlier this week, Justice announced that he will call the West Virginia Legislature into special session on Monday, Sept. 30, to consider supplemental appropriations, a state child care tax credit, and a 5% cut in personal income tax rates that he first proposed back in July.

“We’ve been talking about this since the summer. We’ve been at this a long time,” Justice said.

The Governor’s Office has yet to release specific proposals for how to accomplish a 5% personal income tax cut, but the state Department of Revenue estimates the cut would return approximately $115 million to taxpayers if approved by lawmakers.

Justice said the special session will include supplemental appropriations to spend some of the $562 million in unappropriated surplus from the end of fiscal year 2024 after expenses and $80 million in unappropriated monies for the current fiscal year. Justice has also proposed paying for the tax cut with available surplus tax dollars.

But lawmakers, both publicly and privately, have raised concerns about cutting personal income tax rates too quickly, outpacing natural growth in tax revenue and future expenses that will begin when the next governor and lawmakers in 2025 begin crafting the fiscal year 2026 budget.

Speaking Tuesday on WV MetroNews Talkline, Senate President Craig Blair said that consideration of future tax cuts should be left up to the lawmakers who take office next year following the November elections and the next governor, who will be in charge of crafting revenue estimates and the general revenue budget for the next fiscal year. Justice, a Republican candidate for U.S. Senate, is finishing up his second and last term as governor.

“Keep in mind that this 5% wouldn’t have any impact on this fiscal year. It would be managed by the upcoming legislative session,” said Blair, R-Berkeley, who lost his primary election in May and will not be returning to the state Senate next year. “You also have to factor in that you’ve got a governor that will be coming in, and what we do today could actually be unwound in February and March. I don’t necessarily know about the urgency of being able to do this other than trying to lock down the future for this extra 5%.

“I’m concerned personally, and I think a lot of my members are in the Senate, that if we are going to do an extra $110 million tax reduction, we’ve got to make sure we don’t make that point in time that we look back and we failed and future legislators might have to come back and increase taxes,” Blair continued. “That’s the last thing we want to do.”

A 4% cut in personal income tax rates is also going into effect in January 2025 thanks to a formula and trigger mechanism within the 2023 bill that cut personal income tax rates by 21.25%. But that 4% cut, which will return $93 million to taxpayers next calendar year, is paid for in part due to the Legislature not passing several of Justice’s recommended tax credit proposals earlier this year. Justice believes that the 5% tax cut can be paid for one way or another.

“For crying out loud, we’re talking about a little over $100 million here,” Justice said Wednesday. “If we take it out of surplus dollars this year…or we come up with something we can actually say ‘well, we cut back on this’ and we gave a 5% tax break to our people so we’ve got it all covered. Whatever the situation may be…We just can’t afford to just keep kicking the can down the road and not acting. If that is what we want to do, then that is on somebody else. That’s not on me.”

Justice also pointed out that the Legislature in 2023 transferred $400 million into the state personal income tax reserve fund to cover any tax revenue issues resulting from cutting personal income tax rates. But the fund that $400 million is sitting in is for paying out personal income tax refunds. In July, the state took $5.8 million from that fund for that purpose, though state revenue officials said they plan to pay that back.

“We put $400 million in basically the emergency day fund that’s a rainy day fund in regards to our personal income tax. It’s earning interest, and we’ve probably now got $430 million in there,” Justice said. “I’d be willing to put some more money in there if we wanted to put some more money in there.”

Justice has cited inflation and higher prices for food and everyday goods for the need to reduce personal income tax rates more quickly. According to a report released Wednesday by the U.S. Department of Labor, the rate of consumer prices rose by 2.5% in August, which was down from 2.9% in July, bringing the nation’s inflation rate down to its lowest rate in three years. Justice said approving an additional 5% personal income tax cut will only help and not hurt the state.

“From my standpoint, Toby and Edith are really hurting from this inflation stuff, and we can do this and we’ll never even know we did it,” Justice said. “It will send a great signal to the world.”