Sen. Joe Manchin has issued a warning on tax cuts.
Manchin, who served six years as the state’s governor, and before that served in the state Legislature, was back in his old stomping grounds Wednesday. He met with Senate President Craig Blair and House Speaker Roger Hanshaw and gave them specifics on how much federal money the state has received over the last six years.
The senator believes the information is essential to the ongoing tax cut negotiations.
Manchin’s point was to ensure that state lawmakers understand how the dramatic increase in federal dollars during the pandemic has added to the state’s surplus. The state is expected to end the fiscal year about $1.7 billion ahead of estimates. Legislators and Gov. Jim Justice cite that surplus as reason for a significant tax cut.
Figures from Manchin’s office show the state received an average of $15 billion annually in federal grants and direct payments from fiscal years 2017 through 2019. However, that amount spiked to almost $21 billion over each of the last three years.
Manchin said much of the additional nearly $18 billion over three years is one-time money, and that is important to understand when contemplating a tax cut. “I don’t want the state to not have the knowledge of exactly what has come in, and as they make these decisions be very concerned about this because it will not last,” he said. “You’ll go back to normal times eventually.”
Justice’s bill — passed by the House — cuts the state income tax by 50% over three years, at a cost of over $1 billion. The Senate plan cuts rates by just 15%, but it also rebates 100% of the car tax and 50% of the personal property tax small businesses pay on equipment and inventory, and eliminates the marriage penalty. That would save taxpayers about half as much as the governor’s plan.
However, Manchin was careful during an interview with me on Talkline to not take a side in the ongoing tax-cut negotiations at the Capitol. “I didn’t get into what the legislation would be or what their policy changes should be,” Manchin said. “I just wanted them to have all the knowledge to make the best decision they can.”
“That’s my job,” Manchin said. “You can call it a warning, you can call it whatever it is, but be careful.”
The true impact of the flood of federal money on the state’s surplus has been difficult to calculate. It’s an historic amount of money distributed into any number of different buckets. Manchin’s numbers suggest the federal largess has been a larger contributor to the surplus than many at the State Capitol would like to believe.
He advises caution. Now we will see if Justice and the Legislature heed his warning.
