MORGANTOWN – The governor’s income tax cut bill took an apparent nose dive Friday afternoon, as the state Senate declined to take up the bill and instead passed its own resolution outlining its tax cut plan should voters pass Amendment 2 in November.
The House passed and sent over the income tax bill, HB 301, on Thursday. It contained Gov. Jim Justice’s plan to cut personal income taxes by an aggregate 10%.
Instead, the Senate took up SR 303 a resolution “for meaningful tax reform and relief.”
Finance chair Eric Tarr, R-Putnam, said they were constrained from putting their proposal in bill form because the governor’s special session call limited it to his bill. Had they had an opportunity to talk with Justice before the session, they would have introduced their plan to him.
The Senate GOP plan is spelled out in a book released at the start of the special session. Tarr walked through its main points, mentioning that they have bills ready to introduce to carry out the plan.
It begins with approval of Amendment 2 on November’s ballot: “To amend the State Constitution by providing the Legislature with authority to exempt tangible machinery and equipment personal property directly used in business activity and tangible inventory personal property directly used in business activity and personal property tax on motor vehicles from ad valorem property taxation by general law.”
Tarr explained that state budgets and state revenue tend to run in parallel, with revenue typically exceeding the budget by $147.7 million. The flat budgets of the past four years have helped lead to the current $1.32 surplus.
The idea, he said, is to combine four years’ worth of growth – about $590 million – as a fund to make counties whole should the amendment pass and they lose the property tax revenue. There are three scenarios based on county tax assessments.
From the book, he cited the example of Lewis County, which has seen its personal property tax assessments decline over the past five years. Its 2021 assessment was $3.072 million. By combining the highest assessments of six varieties of property tax across five years, the plan proposes a revenue replacement of $5.241 million.
At the minimum, he said, a county would receive $1 million more than its 2021 assessment to help cover regional jail costs. McDowell is an example of this. Its 2021 assessment was $4.4356 million and it would receive $5.356 million.
The plan also includes triggers for future income tax cuts, Tarr said. Every time sales tax collections rise by 5%, income taxes will be cut.
The plan also includes one-time payments for certain state retirees and a cost-of-living raise.
Tarr said they don’t want their plan to make counties whole to cost more than $600 million. The current window is $590 millon and if they would pass the governor’s tax plan – costing $255.2 million — there wouldn’t be enough surplus left to enact their plan.
Because revenues fluctuate, Tarr said in answer to a question, the plan puts $100 million of excess revenue into the Rainy Day Fund to serve as pool to make counties whole in bad budget years. When that pool dips below $100 million it gets refilled.
The resolution was sponsored by all 23 GOP senators. Sen. Ryan Weld, R-Ohio, said his district is bordered by Pennsylvania and Ohio, which don’t tax business inventory, equipment and machinery, and the plan would help.
Saying tax policy affects behavior, he cited the example of all the car dealerships that moved from downtown, which has a business and occupation tax, into a part of the county called the Highlands, which doesn’t. They moved to save the tax money.
Sen. Mike Romano, D-Harrison, surprised some by saying, “Believe it or not, I say say vote for it. It’s a good plan.”
However, he cautioned, it has two fatal flaws. One, “Good times don’t last forever.” And two, in years to come the counties will be at the mercy of future legislatures, which means a loss of local control. Local control is why the state Constitution protected their revenue streams.
Romano said he would have liked to have been part of the conversation; he favors replacing the business and vehicle taxes, which are gross taxes due even if the business loses money, with a net income tax.
Sen. Jack Woodrum, R-Summers and, like Romano, a former county commissioner, said many counties are seeing declining revenue. This makes their income steady and covers jail costs. “You can’t get a better deal for the counties right now.”
Senate President Craig Blair, R-Berkeley, stepped down from the president’s podium to promote the resolution and the plan. “We can afford to do this today.” It will stimulate business growth and bring people back to the state, he said.
Blair thanked Justice for putting his bill on the call so senators can now take their plan out to the counties.
Minority Leader Stephen Baldwin, D-Greenbrier, offered one gentle nudge. “People need help right now.” This plan gives help later, he said; it can’t be done this session but they could provide some relief from the current surplus.
The resolution passed unanimously, 30-0.
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