CHARLESTON, W.Va. — Senate President Mitch Carmichael said negotiators of a state budget deal are likely slowing the roll of a personal income tax reduction.
“The governor is still, and I believe rightly so, committed to fundamental tax reform in which we cut taxes for working West Virginians. He still very much wants to do that, and I one hundred percent agree with him,” Carmichael said Tuesday afternoon at the Capitol.
“What I’ll say is there are other viewpoints in the House that we need to accommodate that take a much slower approach, and we’re working through those issues with them. I feel confident we’ll have an agreement.”
As Carmichael spoke, he was heading into a meeting among leaders of the Senate and House of Delegates. The meeting, which lasted about an hour, was the second of the day. Legislative leaders on Monday met with Gov. Jim Justice.
The discussions have gone on during a 10-day recess from a special session on the state budget and related issues that began last week. All of the lawmakers are expected to return Monday to continue the session.
The Republican majority in the Senate, along with Governor Justice, have expressed enthusiasm for lowering the personal income tax with a goal of eliminating it over time.
A budget package they negotiated would have raised the consumer sales tax by a penny six months prior to lowering the personal income tax by an average of 20 percent. The resulting revenue cushion would be a key component of balancing the state budget.
Republicans in the House of Delegates have objected to the increase in the state sales tax, as well as other proposed tax increases that have been considered as part of a budget deal.
“In essence, I think the governor has characterized it as watering down a great idea,” Carmichael said. “For every working, wage-earning West Virginian you would have received, on average at the low income levels, $400 on tax cuts whereas the additional sales tax one would pay at those income level brackets is roughly $120, so you would have made out very well under this proposal.
“I know there’s some concerns about raising the sales tax one percent to reduce the income tax by 20 percent, but basic math skills would enable one to quickly surmise that it’s a tax cut for working West Virginians.”
Whatever resolution is reached, Senate Finance Chairman Mike Hall said he is urging those involved to avoid any situation that would put the state right back into fiscal problems next year.
“My main concern, and I’ve expressed it many times today is that whatever we do that we do not create a budget crisis for next year, that we try to get this thing stabilized so as we leave this process today that we’re not creating a problem for us in six or seven months when we come back here,” said Hall, R-Putnam.
“The governor has got to make a revenue projection for next year’s budget, and he’s got to do that in six or seven months. We come back here in January. We started late last year. It’ll seem like we just got this done and we’re back here. I’m very much an advocate that you just can’t do something in a cavalier manner and you walk in here in six or seven months and you’re $300 million short for next year.”
Hall said some of Tuesday’s conversation dealt with when some tax changes would take effect.
One issue with lowering the income tax next January is that would occur a couple of months after the governor’s staff sets revenue projections for the next fiscal year.
Any longer-term economic benefits of an income tax decrease would be especially hard to determine if the tax reduction hadn’t even gone into effect by the time the revenue estimates were traditionally completed.
“One suggestion was you really shouldn’t be raising any rates or lowering any rates until they both come in at the same time,” Hall said. “So if you’re talking about an income tax decrease you wouldn’t have a sales tax increase until that time.”
More discussion was about the House’s preferred plan of broadening the economic sectors subject to the sales tax, including telecommunications and some services.
“The other conversation is about broadening the base and looking at things we currently exempt from sales tax activity,” Hall said. “There’s kind of a narrow list there, it’s not an unpredictable list. You have telecommunications tax, which all of our surrounding states do, some data collection taxes.”
A few other topics were part of Tuesday’s discussion too. Some were connected to the possibility of improving energy markets.
Then there’s some conversations about things somewhat related to the gas industry, things that may be taxable events and so forth that may or may not be acceptable,” Hall said.
“We looked at revenue like that. We talked about some of the governor’s projections in terms of severance tax revenue, not in terms of severance tax rates, as a factor in the plan. We talked about the budget numbers, that was part of the conversation.”
And legislative leaders also talked about Justice’s highways funding proposal, reflected by a bill that would raise fuel taxes and fees at the Division of Motor Vehicles.
The Senate approved that bill during the regular session, but delegates instead approved a bill that would result in a public bond vote for highways dollars.
Governor Justice has pointed to the highways proposal as a major jobs generator and economic stimulus.
“I think the conversation there is, we began to say this whole concept should at least be given the light of day and the ability of people to express themselves through vote or whatever,” Hall said.
“So I think the governor’s interest is to get that done, but it can only be done if it’s actually active on the agenda of both houses so there’s some conversation about that happening.”