6:00: Morning News

Progress in budget talks… finally

Governor Jim Justice emerged from one of his budget shuttle diplomacy meetings Tuesday and told our Brad McElhinny, “I absolutely believe without a doubt we’re making progress, real progress.”

The Governor typically spices up his language with colorful metaphors and hyperbole, so listeners have to be cautious about reading too much into his words. But this time the Governor was right on.  There has been progress toward resolution.

The Governor spent the weekend crafting the framework of the critical revenue portion of the budget. Using the “give a little, get a little” approach, Justice meshed his ideas with plans from the  House and Senate, Republicans and Democrats, to create a plan that might just pass both chambers.

However, Justice added some weight to the grand bargain, telling at least one group of lawmakers that if they did not take his deal he was going to leave town and blame the Legislature for the shutdown.

Here are some key details of the framework:

The cut in the personal income tax rates is slowed to seven percent each of the next two years and six percent the third year.  The reductions in years two and three will depend on certain economic triggers.

Exactly what those triggers are could be an issue. Senate Republicans want those triggers reachable, thus increasing the possibility of multiple year tax cuts, but other members of the Legislature worry those reductions could leave the state in a budget hole.

The framework includes raising the sales tax from the current six percent to 6.35 percent while broadening the base.  Part of that broadening includes removing the sales tax exemption for contracting services. That would generate a whopping $92 million next year, but it’s controversial.

Currently, contracting services for capital improvements are exempt from sales tax. For example, if you build a house or construct an addition the materials are taxed, but not the labor. Under this proposal, the labor would also be subject to the new 6.35 percent sales tax.

The Governor and legislative leaders have cobbled together a variety of funding for roads; higher DMV fees, an increase in the vehicle sales tax from the current five percent to six percent, a change in the calculation of the wholesale gas tax that would raise the price four to five cents a gallon, and a commercial activities tax of .015 percent on the gross.  (For example, a business that has an annual gross of $1 million would owe an additional $150.)

Those taxes and fees would raise an estimated $138 million for roads next year.  The money could be used for road repairs or as a funding source for a much larger statewide road bond issue, which is what Governor Justice wants.

The early take from legislative leaders seems to be this is something that just might work. Democrats and Republicans are caucusing to determine the breadth of support, while also addressing concerns.

Nobody is going to be completely pleased with these revenue plans, and some lawmakers will be adamantly opposed to them.  However, given the bruising negotiations to get to this point and the looming government shutdown, a consensus with only moderate dissatisfaction from most lawmakers will be an acceptable outcome.

 

 





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