CHARLESTON, W.Va. — The next likely step for a proposal by Republicans in the state Senate to raise the sales tax to 7.25 percent while reducing the personal income tax by an average of 20 percent over two years is the Senate Finance Committee, and that’s where matters could turn even more interesting.
The chairman of the Finance Committee, Senator Mike Hall, has stood out among his Republican peers by declining to sign on for various incarnations of the tax changes along the way.
Hall, one of the Senate’s longest-tenured Republicans, has said consistently that he would be against any proposal that would sink the state even deeper into the red in future years, as critics believe would happen with the Senate GOP plan.
And over the past few weeks, Hall has openly advocated for a simpler plan to balance the budget by the coming fiscal year on July 1, worrying later about bigger issues such as tax reform or the appropriate size of government.
Hall has talked about those ideas with media, his fellow Republicans in the House of Delegates and the Democrats in the Senate, although doing so is not uncommon. Senator Robert Karnes, the chief advocate of the income tax proposal, has done the same.
When the plan goes to the Finance Committee, as is expected today, overturning the apple cart would require all of the committee’s Democrats and three Republicans.
That committee includes 17 members.
The six Democrats include senators Doug Facemire, Corey Palumbo, Robert Plymale, Roman Prezioso, Ron Stollings, and John Unger.
The 11 Republicans include Hall, vice-chairman Jeff Mullins and senators Craig Blair, Donna Boley, Greg Boso, Ryan Ferns, Ed Gaunch, Kenny Mann, Mike Maroney, Dave Sypolt and Tom Takubo.
During this morning’s floor session, though, Republicans Chandler Swope and Maynard were named to Finance to replace Sypolt and Maroney, filling some holes that have occurred because of special session absences.
Ferns, the Senate majority leader, and Blair have been particularly outspoken in their support of the income tax plan. Both serve on the Select Committee on Tax Reform that formulated the proposal and passed it again yesterday, as do Boso and Gaunch.
The Democrats, except for Unger, voted as a block in favor of the Senate’s tax plan two weeks ago. But last week, they all dropped off in a 19-11 vote on a similar measure.
Prezioso, the Senate minority leader, said Democrats were concerned that the new tax structure would hit lower- and middle-class wage earners hardest. They also worried about the effects of the tax cuts on budgets in later years.
“We would definitely face a busted budget in the next fiscal year,” Prezioso said the day after that vote. “The problem is this budget is piecemeal.
He added, “It needs to be studied more. You need more relevant facts. We’re just not there with the income tax.”
Hall has sometimes voted for the income tax plan — as it was approved by the Finance Committee during the regular session and in the various votes the full Senate has taken during the special session.
But he stood out by abstaining from the original sponsorship of the bill when his Republican colleagues signed on. And he has expressed caution about budgets in coming years.
“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, said on May 10.
“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 has been among those advocating for a plan that solves the current budget gap while allowing more time for tax reform later.
“So the simplest solution is the best one – just raise an existing tax a little bit for a short time until you get rid of the problem and if our economy comes rolling back. I’m going to suggest it as a compromise for a couple of years,” Hall said on April 19.
“Then you could pile tax reform on the back end of things or you could build it in.”
Republicans in the Senate on Monday doubled down on their income tax proposal, jettisoning some aspects of the proposal that had been meant to appeal to Senate Democrats and to the House of Delegates.
The proposed sales tax, which was at 6.95 percent last week, was raised to 7.25 percent on Monday. And personal income tax tiers, which had been four at the insistence of Democrats, were rolled back to three with the highest bracket starting at $35,000.
“Our caucus in the Senate has had a goal of being very aggressive with eliminating the income tax to put West Virginia on the map, to give as much of a break to working men and women as we can and also to make this place more attractive for people to come here,” said Ferns, R-Ohio.
“That’s why you saw our initial plan come out at an 8-percent sales tax. Now obviously a lot of our colleagues in the House expressed concern with that, some of the Democrats here in the Senate did as well. So we tweaked that. So now, seeing as it doesn’t appear this is going to be a bipartisan effort in the Senate at least, we’re looking at taking the sales tax up a little bit more so we can exempt the income for Social Security recipients as well as veterans and continue as aggressive an approach to eliminating the income tax as we can.”
House Speaker Tim Armstead said moving farther away from a compromise doesn’t bode well for avoiding a government shutdown at the start of the new fiscal year July 1.
“I think their unwillingness to try to reach middle ground on this issue makes it more likely that it’s going to take longer to resolve this and puts more of a risk in play that there will be a shutdown, which no one in the House wants to see take place,” said Armstead, R-Kanawha.
“I believe their actions today don’t make a shutdown less likely; they make it more likely.”
Karnes, the chief architect of the Senate’s bill, took aim at the House over Friday’s bipartisan vote to abandon the broader income tax cuts and leave the sales tax where it is.
“The House threw a wrench into things a little bit. I don’t think [it’s] entirely responsibly because I think what they really were attempting to do is throw a wrench in the whole process,” Karnes told reporters.
Karnes said the bipartisan nature of the House vote amounts to capitulation by Republicans there. Republicans in the Senate, though, have negotiated directly with Gov. Jim Justice, a Democrat, and gained his support.
“If the House Republicans have gotten totally on board with the House Democrats and the Senate Democrats, then what you really have is a Democrat bill that the House Republicans have capitulated and signed on to,” Karnes told reporters Monday afternoon.
The Senate was returning to session at 9:30 a.m. today.
The House was returning at 4 p.m.
This is the 10th day of the special session.