Senate’s tax reform bill passes committee hurdle

CHARLESTON, W.Va. — The Senate Finance committee voted in favor of a tax reform bill meant to be a key tool in balancing the coming year’s state budget — even after learning it’s predicted to blow holes in future budgets.

All 11 Republicans on the committee voted in favor of the bill. Those included Republicans Chandler Swope and Mark Maynard who were named to Finance just this morning to replace Senators Dave Sypolt and Mike Maroney, both Republicans. The switches were made because of absences, leaders said.

All 6 Democrats on Senate Finance voted against it.

Deputy Revenue Secretary Mark Muchow testified before the committee that the bill results in $147 million in new revenue for fiscal 2018, but — not taking into account any potential economic growth — then results in deficits of $56 million, $122 million, $137 million and $178 million over the coming years.

That’s because the bill would raise the state sales tax to 7.25 percent starting July 1 but then lower the personal income tax by an average of 15 percent starting Jan. 1, 2018, with another average 5 percent reduction the year after that.

The bill also establishes triggers based on state revenue and the consumer price index to lower the income tax over time.

Governor Jim Justice, who supports the bill, has said economic growth spurred by the income tax reductions plus an ambitious highways construction proposal will result in revenue growth.

Democrats in the Senate and members of both parties in the House of Delegates are skeptical of those claims.

On Friday, the House of Delegates passed its own revenue bill that keeps the sales tax as-is and foregoes any general reductions to the personal income tax — although it cuts income taxes on military retirement benefits and Social Security income. The bill generates about $100 million in new revenue through newly-imposed sales taxes on some economic sectors, notably telecommunications and communications.

Robert Plymale

In Senate Finance, Democrat Robert Plymale of Wayne County moved to have the House’s bill fully amended into what the Senate has been considering, with a couple of differences including a 6.5 percent income tax. His proposed amendment was voted down.

Some of Plymale’s fellow Democrats spoke up in favor of the amendment.

“We are in a deficit situation, and we’ve had testimony that said giving income tax break would further the hole we’re in,” said Senator Ron Stollings, D-Boone. “We’re going in the wrong direction with lowering the personal income tax.”

Roman Prezioso

Senate Minority Leader Roman Prezioso noted that the House has voted twice against the bills that included the personal income tax changes and made wholesale changes to another.

“We’ve been down this road about three times sending revenue bill to the House. Each time we send it over, it’s been rejected,” said Prezioso, D-Marion, who also offered his own amendment — which was defeated — to make changes to the income tax tiers and the sales tax.

Senate Republicans now seem poised to pass their version of the “Tax Reform Act of 2017” on the floor. Senators are to return to their floor session at 10 a.m. Wednesday.

If they do so, that likely sets up a conference committee situation with members of the House to try to iron out an agreement.

Senate Finance Chairman Mike Hall, who has expressed worry about the bill’s capacity to create deficits in coming years, voted for it anyway.

Hall said he wanted to move the bill along to the next step to ensure the Senate has something to take to conference committee.

“If that bill dies up there then we don’t have anything to go to conference. A part of it is just a process thing,” Hall said. “Sometimes you have to move beyond things to get them to the place where you can deal with them.

“There comes a point in this process where you have to finally decide, and I think conference committee will be the place where we can fix things.”


Republicans in the Senate and House have had significant differences in their view of state tax structure both in the regular session and now in the special session. Hall said he thinks the differences can be worked out by a smaller group, though.

“We often use this expression ‘the train is off the track.’ The old timers would say that. But I’ve seen the trains get back on the track,” Hall said.

Jim Justice

Governor Justice issued a proclamation Tuesday to add a budget bill, plus a few other bills, to the special session call. The budget bill was being finished up behind the scenes throughout the day today, but lobbyists said hard copies were delivered to lawmakers about mid-afternoon.

“Now that we have action on the revenue legislation in motion I’ve sent up the budget plan,” Justice stated in a news release. “There is still much work to be done. Once all of the bills are passed, most importantly the roads bills, then the budget is ready to be the last thing to be passed.”

One upshot, Hall said, is that revenue estimates reflected in the budget bill will be increased.

“He’s going to increase the revenue estimates based upon the passage of these road bills and the coal severance activity. He’s going to raise the revenue estimates about $130 million. So that helps fill the gap.

“Then the tax revenue measure gets you about another $130 million. You’re probably doing the math. That gets you $260 million, about where you need to be.”

After that would remain a matter of believing, as the governor does, that the income tax reduction and the roads projects will boost productivity.

“Then for ’19 he’s of the opinion that growth will be dramatic and it’ll overtake that extra $100-, $150 million they’re gonna need for next year,” Hall said.

“Some form of this bill, somewhere, may actually work.”





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