Now that state officials know an automatic income tax cut triggered by economic factors will be 4%, they’re gathering more information about whether West Virginia can afford another 5% on top of that.
That assessment will take place over the next couple of weeks as state revenue officials in the executive branch present data to legislative leaders. It’s all building up to the possibility of a legislative special session at the end of August.
Gov. Jim Justice announced this past week that the additional 4% reduction in personal income tax rates will take effect on Jan. 1.
The significance was that Justice was able to specify the number, solidifying an earlier prediction that the automatic reduction would be either 3% or 4%. The reduction was triggered after the state’s revenue collections surpassed the rate of inflation, as stipulated in legislation the governor signed in 2023.
In addition, Justice has continued to publicly push for lawmakers to return to a special session in August and pass a 5% income tax decrease on top of that. He repeated that desire during a regular news briefing this past week.
All of this would follow up on a 21.25% personal income tax cut that went into effect this year. Justice, whose final term ends at the end of the year, has described wanting to move toward elimination of the income tax.
“I’m calling everybody back in, and the reason I’m calling them back in is I want ‘em to be able to do another 5%. Another 5% gets us at 30 (percent), in fact a little bit above 30. And so we’re a third of the way almost home. And there is nothing, no matter what anybody says — I don’t care what you say 10 million times — there is nothing that’s going to drive population, opportunity, economic growth on and on and on to this great state more than getting rid of our personal income tax,” Justice said.
Larry Pack, the state’s acting revenue secretary, said hitting the automatic tax cut trigger is a sign of health for West Virginia’s economy.
“It goes to the performance of our state. It goes to how hard our folks are working and the taxes they’re paying,” Pack said Friday on MetroNews’ “Talkline.”
Pack, a Republican candidate for state treasurer, said the governor has asked for information to ensure the additional 5% cut is feasible.
“He absolutely believes it is. I agree with him. I think so,” Pack said. “But we are being prudent about it. So what we’re doing is we’re going back and looking at the numbers, looking at our projections for the next fiscal year.
“Again, we set the revenue estimate in the current budget; we set that last winter. So we’re reviewing that. Our economic conditions have really increased and are doing much better.”
Over the next week or 10 days, Pack said, more in-depth discussions will occur with legislative leadership.
“We’ve asked them to give us a couple of weeks to bring numbers to them and to answer all their questions. They’ve also given us some answers and concerns. We’re working through those just to make sure we can answer and get it all together. So the governor says let’s move forward; let’s get the 30%, but at the same time let’s don’t shoot our legs off.”
Senate President Craig Blair has said his feel for the state’s finances makes him doubt the additional 5% is feasible right now, but he’s willing to discuss it. Senate Finance Chair Eric Tarr has questioned whether the state is in position to strike that balance, suggesting difficult cuts or raising another tax would have to be the tradeoff.
“They’re right to question us and ask questions, and there’s nothing wrong with that,” Pack said. “So we’re going to put together a package to be able to show them to alleviate their fears and so forth and to get us to where we need to go.”
“Under the dome, if you focus too much on how people ask you to spend money, there’s always things to spend money on. What Gov. Justice has done is, he’s told us to put the priority on making West Virginia competitive and put the priority on making sure taxpayers get to keep all their money that we can.”
House Majority Leader Eric Householder Friday told “Panhandle Live” on WEPM Radio that the state is able to assess this financial decision because the fiscal year ended $826 million above estimate. He noted that during a May special session, lawmakers already agreed to allocate about $230 million.
“So we have roughly $600 million left to spend. That’s why you’re hearing the governor’s thinking about calling us back for a special session in August to decide what we’re going to do with that $600 million,” said Householder, R-Berkley.
Addressing the 5% additional tax cut proposal, Householder concluded, “I’m supporting what the governor has asked us to do.”
