CHARLESTON — Gov. Jim Justice made it known Wednesday that he is not a fan of plans by the House of Delegates or the state Senate to phase out the personal income tax. Justice is also unhappy with proposed Senate cuts to his budget.
Speaking by phone Wednesday afternoon, Justice said he is fine with the House and Senate wanting to make changes to his original proposal to cut the personal income tax by 60 percent for individuals, but both plans go in two extremely different directions.
“I have said repeatedly over and over and over that I don’t have anything that is etched in stone that has to be a certain way,” Justice said. “I think we should go big.”
House Bill 2027 and Senate Bill 600, the Governor’s tax reform plan, never got out of committee in time for crossover day Wednesday, the day bills must be passed from one chamber to the other.
The plan includes the 60 percent personal income tax cut and a tax rebate for residents earning less than $35,000 per year.
Justice’s entire tax proposal and tax rebate would decrease state tax revenue by $1.088 billion. Justice proposed $902.6 million in proposed tax increases to pay for the personal income tax cut, including raising the consumer sales and use tax rate from 6 percent to 7.9 percent; creating a tiered severance tax for fossil fuels; a new tax on certain luxury goods; and increased taxes on cigarettes, tobacco products, e-cigarettes, beer, wine, liquor, and soda.
Justice would also remove sales tax exemptions from professional services, such as legal services, accountants, computer hardware and software, and other categories.
The House passed House Bill 3300 Monday, phasing out the personal income tax by $150 million in its first full year and annually until the tax is gone. The House version includes an Income Tax Reduction fund, which skims off tax revenue from special revenue sources and existing income streams to help accelerate the tax cuts while also encouraging decreased government spending.
A report released Tuesday by the non-partisan Tax Foundation estimated that the House plan would take anywhere from 11 to 17 years to completely phase out the personal income tax, but it includes no tax increases.
“The House plan really does not go big at all … it doesn’t achieve all the things that need to be achieved,” Justice said. “Nobody’s going to pick up and move to West Virginia on that point because they don’t believe it. In all practicality, that plan would probably take 20 years to materialize, and it’s just not believable right now.”
The Senate Finance Committee amended HB 3300 to put in their own personal income tax plan which attempts to marry parts of the House and Governor’s plans. The Senate plan would reduce personal income tax rates by more than 50 percent, including for small businesses and sole proprietorships but not for investment income. The plan would reduce revenue from the personal income tax by $1.09 billion.
To pay for the personal income tax cut, the Senate version of HB 3300 would raise the consumer sales and use tax from 6 percent to 8.5 percent. It would also remove sales tax exemptions for services commonly used by businesses and tax some at lower rates.
Other tax increases in the Senate version include reinstating the food tax at 2.5 percent; taxing prepared food at 8.5 percent; a 4.3 percent tax on short-term lodging; an 8.5 percent tax on contingency-based legal settlements; and the creation of a new Lottery scratch-off game.
Justice said he was not informed or consulted on the Senate version of HB 3300. He described the Senate plan as an effort to make special interest groups opposed to his plan happy while coming down harder on working West Virginians.
“I do not know why on this earth the Senate would come out with their own plan without ever picking up the phone and call,” Justice said. “Their plan really just lays all the burden right at the foot of those that are probably struggling, like it or not.
“Basically, you’re letting the swamp run the show and not the people in West Virginia run the show,” Justice continued. “So, all of them get off scot-free and the people that have an income that’s less than $35,000 are going to get hammered.”
Justice was also critical of the budget that came out of the Senate Finance Committee on Wednesday afternoon. Senate Bill 125 balances the budget by cutting $104.6 million, including cuts to Justice’s Jobs and Hope substance abuse and job training program, the Communities in Schools program, and four-year and two-year colleges and universities.
“I just don’t get it,” Justice said. “I really question all of my colleagues — Republican, Democrat, Independent — all. The one thing that we have got to all do is we have got to stay in touch with the people. I’m not there to do what I want to do for Jim Justice personally. I’m right there to do what is right for the people and what the people want to do.”
Business groups and tax reform organizations have come out against the Governor’s plan over the last few weeks. They claim his plan does not cut personal income tax rates used by small businesses and sole proprietorships and the tax increase will hurt them.
With just 9 days left until the session ends on April 10, Justice is hopeful a compromise can be reached in time. Justice is also not opposed to a special session to hammer out a personal income tax deal between himself, lawmakers, and the business community. But Justice believes the state needs to act quickly while the eyes of the nation are on West Virginia.
“I’m open to anything from a standpoint of just making good stuff happen for our people. There’s no question about that,” Justice said. “If people can listen to common sense and we can move forward and work together and everything, that’s great. The biggest handicap for coming back is every day that we delay with everybody looking at us, our moment will pass.”
(Adams can be contacted at [email protected])
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