CHARLESTON, W.Va. — Changes were being made to a revenue bill in the state Senate today, partly in an attempt to make sure Democrats are on board.
Although the House of Delegates rejected a revenue bill backed by Gov. Jim Justice on first reading on the opening day of the special session, Senate President Mitch Carmichael vowed today that the Senate would vote on a revenue bill and pass it.
But the Senate, which was supposed to go into session at 11 a.m., experienced delays as work went on behind the scenes on the bill.
The special session opened Thursday with long delays caused by behind-the-scenes negotiations over severance tax rates on coal.
MORE: Read the original version of the revenue bill.
Today’s work included changes to the personal income tax structure and the removal of natural gas from the portion of the bill changing severance taxes. The natural gas industry contended the proposed rates would have been noncompetitive.
The main sticking point today was the personal income tax portion. The original version moved taxpayers to three tiers, with the highest bracket starting at $35,000 in income.
Democrats said the structure is regressive and said those making $35,000 are hardly high-wage earners.
The revised bill will establish four tiers while also eliminating a Justice-backed lump sum tax on higher-wage earners.
As the delays went on in the Senate, Democrats were caucusing to decide whether the changes were enough to earn their votes. The more conservative Republicans indicated the weren’t thrilled by the changes but said the bill still goes far enough to reduce the income tax to have their support.
“We’ve locked in on those personal income tax rates, adding a fourth bracket,” Carmichael, R-Jackson, said today after the Senate went into session about 12:30 and recessed almost immediately.
“Currently, there are three and the governor wanted a millionaire’s tax kind of thing and rather than adding a surcharge we added an additional bracket that just cleans up the tax code — gives him exactly what he wants but does so within the current construct of the tax code.”
The fourth income tax tier would begin at $300,000 in annual earnings. Those making that much or more would have made an annual payment of $250 under the previous structure backed by Justice.
There were also changes being worked out to triggers that bring down the income tax rate in future years. Senate leaders said the bill that was introduced Thursday did not reflect the triggers originally agreed upon.
“They had some formulas in there that were pretty difficult to ever achieve, so we’ve put formulas in there that pretty much everyone believes are attainable with some growth in our West Virginia economy.”
Senate Minority Leader Ryan Ferns said striking the right balance and ensuring communication has been a challenge with the many parts of the revenue bill.
“Speaking with my Democratic colleagues here in the Senate, I think that even they feel like they haven’t been completely kept in the loop as this has been an ongoing, changing piece of legislation,” said Ferns, R-Ohio.
“I think there’s been some concern from them that they have not been fully understanding what seems to be an evolving piece of legislation.”
Ferns added, “If it’s not something that’s going to have bipartisan support then I don’t think it’s something we’re interested in even bringing it up.”
Carmichael and the governor have discussed the possibility of an overwhelming yea vote in the Senate, possibly in the range of 30-4 or 34-0.
“We were called down here by the governor to work on this piece of legislation, and if we do have an agreement with a good portion of our Democratic colleagues in the Senate and our own caucus then we should at least execute what we said we were going to,” Ferns said.
“So we’ll do that much, but if the minority caucus gets together and feels like the changes the governor’s office has continued to make every day since we’ve been here is not agreeable to them then that’s something we may not act on today.”
Senate Minority Leader Roman Prezioso, D-Marion, acknowledged reservations by his caucus over the income tax tiers.
“We’re concerned by lowering the income tax and raising the consumer sales that it puts an undue burden on the lower income people and the middle class people,” Prezioso said.
“So we wanted to make sure that the higher income people on the scale pay their fair share of taxes.”
Prezioso and the Senate Democrats also seek assurances the math in the revenue bill adds up.
“You want the budget to balance, obviously. And there are more cuts in this proposed revenue bill than revenue enhancements. I know they’re saying the economy is going to grow, but we want a little more of an indication that we have some money to back up so we don’t have to go in and cut programs and DHHR and higher ed.”
Senator Robert Karnes led the Senate’s Special Committee on Tax Reform, which looked at a variety of changes to the tax code during the regular legislative session.
Karnes said he isn’t enthusiastic about the most recent changes to the income tax proposal, but he continues to support it.
“They’re not what I think is ideal. I think it’s a mistake. I think it’s a major mistake on the part of the other caucus to want to impose higher taxes on the job creators in the state,” said Karnes, R-Upshur.
“That’s really what they’re shooting for is to say, ‘Hey, we’re going to stick it to rich guys.’ I think in West Virginia for the last eight decades we’ve had an attitude of ‘Let’s stick it to the rich guy,’ and what we’ve done is we’ve chased most of them out of the state.”
But Karnes acknowledged that compromises will be necessary to produce a bill that will eventually pass and form the basis of a state budget.
“I don’t like it. I think it’s a bad idea. But we don’t always get exactly what we want out of such a bill that’s as complex as a tax reform bill that’s really making substantial changes to the tax code in West Virginia.”
The House of Delegates was expected to return to session this afternoon after having already rejected a Justice-backed revenue bill on first reading Thursday afternoon.
Speaking this morning on MetroNews’ “Talkline,” House Speaker Tim Armstead said the proper course now is to adjourn and let legislative leaders negotiate with the Justice administration on a budget plan that could be acceptable to all.
“I have talked to Mitch, and what I’ve suggested to him is we take a recess. I have urged him to consider us taking a recess,” said Armstead, R-Kanawha.
The goal, Armstead said, would be to “get in a room and listen to each other and take everybody seriously and try to find a plan we can all accept.”
Armstead added, “We didn’t think we should have been brought in until there was not only a bill but an agreement.’