CHARLESTON, W.Va. — The state Senate voted 30-2 in favor of a new revenue bill that includes income tax reductions.
The bill, which also includes a sales tax increase to 6.5 percent and adds taxes to additional economic sectors, raises an estimated $82 million new revenue. The state revenue estimate for the coming fiscal year prior to the bill’s passage was $4.225 billion.
The two Democrats who voted against the bill were senators John Unger and Mike Woelfel.
That vote led right into another vote on a $4.35 billion budget bill that would include many of Gov. Jim Justice’s priorities, including Medicaid funding without cuts, higher education funding with some cuts, an average 2 percent teacher payraise and a Save our State fund.
The budget bill also passed with only Republican senators Patricia Rucker and Robert Karnes voting against it.
The overwhelming vote on the revenue bill Thursday night sets up a vote in the House of Delegates, where both Republicans and Democrats have been critical of the idea of income tax cuts at this time.
It’s all taking place within days of the new fiscal year July 1.
In the Senate, both Republicans and Democrats were claiming victory.
Senator Mike Romano, D-Harrison, said the minority party forced several changes that made the bill more palatable. He also said voting for the revenue bill meant avoiding major cuts in an earlier budget bill that passed the Senate this week.
Karnes, a Republican who led the Senate’s Select Committee on Tax Reform, said Democrats were boxed in and forced to choose between two proposals they didn’t really like.
Governor Justice conceived of the new income tax structure today and pushed for it during a meeting with legislators and lobbyists that ended abruptly.
Just a few days ago, Senate Republicans said they were going to give up on their long-sought goal of income tax reductions. Instead, they passed a $4.25 billion budget bill with significant cuts to Medicaid and higher education.
Senator Charles Trump gave a floor speech about the turnaround: “24 hours ago, I was ready to throw in the towel. And I was wrong,” said Trump, R-Morgan.
“The bill before us now is the best version of it we’ve seen, and we’ve seen many over this long, sometimes torturous process. This bill is better than any before because of the input of the Senate minority.”
The proposed framework would cut personal income taxes by an average 5 percent starting Jan. 1, 2018, followed by triggered cuts of 5 percent each of the following three years — for an average 20 percent cut over the full four-year period.
Under the latest incarnation of Justice’s proposal, wages over $150,000 would not be subject to a tax cut.
The triggers are what the governor calls “Eric Nelson’s triggers” — formulated by the House Finance chairman who has actually been skeptical of the entire idea.
Read this until your eyes cross:
The triggers would use the 5-year average growth of personal income tax revenue and sales tax revenue. That rate would be multiplied by the general revenue collections of the most recent fiscal year, subtracting any Rainy Day funds used to balance the budget.
After that the state tax commissioner would calculate the amount of money it would cost the state if the 5 percent cut would go into effect. The cost of the cut would be subtracted from the first number.
If the result shows that revenue has grown, then the next average personal income tax cut would go into effect.
To add revenue to potentially reach Justice’s preferred budget total of $4.35 billion, the framework would raise the state sales tax to $6.5 percent.
It also applies the sales tax to additional economic sectors such as telecommunications, communications, transportation and digital downloads.
There is also a tiered severance tax system meant to give coal companies a break when prices are low and to increase what they pay when prices are higher.
Justice, describing the plan today, said it was worth a try to put income tax funds back in people’s pockets.
The governor also described a rebate structure for the lowest income brackets.
“That ought to help our most needy, and we can do all this without further cuts and without hurting people more. For crying out loud, that’s what we intend to do,” Justice said.
House Speaker Tim Armstead earlier Thursday said he hoped the governor wouldn’t introduce the new revenue proposal at all. Both Republicans and Democrats in the House have been against the income tax reductions while the state is up against both a deficit and a deadline.
Armstead said he tried to convey as much during the Thursday morning meeting with the governor, lawmakers and lobbyists.
“I certainly hope he listens to the meeting that was held today and abandons that plan because I think he will have zero support for that,” Armstead, R-Kanawha, said after an afternoon House floor session.
Armstead continued, “There were several members of the House and Senate there, and they were trying to convey to him that nothing has changed, there is no support for this proposal and as we get closer and closer to July 1, there is less support and more urgency for us to pass a budget.”
The House of Delegates is supposed to convene at 10 a.m. Friday.