Last week I wrote that Gov. Justice, Senate and House leaders needed to get together to begin serious negotiations on a tax reduction plan. In fairness, at that time the only plan was the one proposed by the governor and passed by the House, so there wasn’t much to negotiate without the Senate’s proposal.
But now the Senate has released its plan and quickly passed it over to the House, so real discussions can begin. It may not be easy to reach agreement because there are major differences between the two.
The plan that passed the House is simple. It cuts personal income tax rates in half over three years, saving taxpayers over $1 billion the first full year (FY 2024). The Senate bill is broader, but more modest with taxpayer savings of $600 million. It includes:
- A 15% cut in the personal income tax rate. The bill also includes additional reductions in the income tax rates when consumer sales tax collections reach certain benchmarks.
- A 100% rebate of the annual property tax on vehicles.
- A 50% rebate for small businesses on their annual personal property taxes on equipment and inventory.
- Elimination of the marriage penalty, which pushes income taxes higher for some couples.
- A homestead real property tax rebate for 90% to 100% service-disabled military veterans.
Senate President Craig Blair said senators deliberated through the first half of the 60-day session before releasing a tax proposal as they calculated how to balance a cut with expenses without putting the state in a financial bind.
“We studied the numbers, and at the end of the day, we knew the state had only about $600 million to give back to the citizens in the form of tax relief,” Blair said. “Our plan provides relief for virtually everybody.”
Last week, Gov. Justice said on Talkline he was open to negotiation. “We’d absolutely compromise,” Justice said. And Wednesday he stayed true to that in his public comments after seeing the Senate proposal.
“I think it’s wonderful the Senate has come up with their plan,” Justice said. “It’s got a lot of really good points.”
Lower income taxes and the elimination or reduction of the vehicle and business personal property taxes are all ideas the governor and Republican lawmakers have been bouncing around for several years, but they have been unable to reach agreement. They could never get to the same place at the same time.
They are still not on the same page. The competing plans are significantly different in both size and scope. However, lawmakers now have a side-by-side comparison and fiscal projections to measure the impact.
They also have a governor who is exuding a spirit of compromise. “Now we sit down to do our real business,” Justice said, “and we negotiate back and forth, and we come up with something that is just really terrific for our people.”
Justice and lawmakers have a month left in the regular session to get it done, and that’s more than enough time. If they fail this time, they will have squandered a historic opportunity to cut taxes.
