A week into the regular legislative session, debate over Gov. Jim Justice’s proposal to cut personal income taxes by half over three years is on maximum.
The House of Delegates moved the bill toward Wednesday passage in that chamber, Senators quizzed Revenue Secretary Dave Hardy, and the governor went on Fox News this week in a national cable news appearance that included a pitch for the proposal.
Despite the flurry of activity, it’s not clear whether the tax bill will get through the legislative process intact.
Members of the state Senate’s Republican majority have questions about how the finances would truly work, and senators are also lined up to push their own vision of a strategic tax cut.
“I think we’re going to take a hard look at the governor’s tax plan. We want to pass tax reform that is responsible and that will have an economic benefit for the state,” said Senate Majority Whip Ryan Weld, R-Brooke, on MetroNews’ “Talkline.”
“Obviously the bill’s out there so we know the details of it. But we have some concerns about the proposed budget and what’s being proposed in the governor’s tax plan because, quite frankly, we’re spending more than we have.”
The House of Delegates advanced the tax bill with amendments pending, moving it to a likely passage vote on Wednesday. From there, it goes to the Senate, where it’s viability isn’t certain.
“We’re going to look and see what the House sends us. We’re going to be responsible about this. We’ve got time to work on this to make sure we get it right because the consequences of this are astronomical,” Weld said. “We can’t do anything that’s going to hurt the bottom line of this state by rushing through a tax plan.”
As Hardy spoke to the Senate Finance Committee on Tuesday afternoon, Senator Rupie Phillips brought up the bitter fights from last fall over Amendment Two, which would have opened the door to personal property tax cuts. The Senate majority favored the amendment, but leaders in the Justice administration had called it irresponsible.
“You came down to Logan and pretty much called us crooks. I’m offended,” Phillips, R-Logan, said to Hardy in the committee room.
Now, Phillips said he doesn’t trust the administration’s calculations on the personal income tax proposal. He objected to the administration’s position that the state could not afford Amendment Two’s tax cuts but now can take absorb a big income tax.
“I don’t get your math. That’s phony math is what I’m seeing,” Phillips said.
Phillips noted the many other expenses the state is facing, including recruiting and retaining urgent workers such as corrections officers and child protective services workers, shoring up the Public Employees Insurance Agency and more. “Where’s the pixie dust coming from to make it work?” Phillips said.
Hardy responded, “Very, very good revenue streams.”
The personal income tax reduction is structured as 30 percent the first year, then 10 percent each of the following two years. The same percentage reductions would be applied to all the current tax brackets.
So, West Virginia’s five brackets – 3 percent, 4 percent, 4.5 percent, 6 percent and 6.5 percent — would all be cut exactly in half over the next three years.
1A fiscal note assessing the bill concludes it would decrease General Revenue Fund collections by about $161.8 million in fiscal 2023, $1,084.5 million in fiscal 2024, $1,229.6 million in fiscal 2025, and $1,492.6 million in fiscal 2026.
Right now, West Virginia is running a budget surplus of hundreds of millions of dollars. But that’s based on several factors, including high energy prices that have produced high-performing severance tax returns and artificially-low state revenue projections that have enforced relatively “flat” budgets for several years in a row.
Governor Justice, during an appearance on Fox News this week, responded to questions about whether the state could really sustain such a deep dive on personal income tax collections over time.
“Some of your critics say that’s a volatile surplus that can come and go,” said host Neil Cavuto. “What do you say?”
Justice responded, “If you think that I, being a business guy, am absolutely going to do something that’s frivolous and absolutely just bank on surplus and not bank on where West Virginia’s going and against the numbers, you’ve got to be crazy. You know there’s no way on earth that I’m going to do that.”
Justice reiterated that he’d made sure to ask his advisers to project the potential effects of the tax proposal even if the economy dives into recession or if energy prices plummet. He also described establishing a $700 million “rainy day fund” in case the tax cut dives too deep into the state’s finances.
“No, Neil, I’m not going to be one to make a mistake on the numbers,” Justice told the host. “You know that’s the only thing maybe I can do, but I can buzz the numbers and I’m not going to make a mistake on the numbers.”
