House votes to reject revenue bill on first reading

CHARLESTON, W.Va. — The House of Delegates voted Thursday evening to reject Gov. Jim Justice’s revenue bill on first reading.

After the vote, Republican delegates gathered behind Speaker Tim Armstead to say they were united in believing the revenue bill they’d been presented did not represent a deal they could take.

Governor Jim Justice, using his Twitter account, quickly objected to the vote in the House.

Delegates earlier had expressed frustration that the Justice administration called the Legislature back into session at 11 a.m. but didn’t have a key revenue bill prepared.

Tim Armstead

“The governor knew the votes were not there to pass his tax increases, and that calling this special session today was premature,” Armstead (R-Kanawha) stated in a news release this afternoon. “Now we’re here in Charleston wasting $35,000 a day and don’t even have the key bill we need to consider.

The House and Senate wound up recessing before noon because there was not yet a revenue bill to assess.

The holdup was a revenue bill backed by Governor Justice and the Senate. A key component — a sliding severance tax on coal and natural gas — had been negotiated right up through the eve of the special session. There was still talk of a meeting early this afternoon between the coal industry and state leaders.

The revenue bill was out shortly before 3 p.m. The Senate reconvened shortly after 3 and went through first reading on three bills — two highways bills and a teacher payraise bill — but recessed without doing anything with the revenue bill. Senators plan to reconvene at 11 a.m. Friday.

Mitch Carmichael

Senate President Mitch Carmichael acknowledged the bumps in the day, but hoped to work through the process.

“It’s true that all the components of it aren’t ironed out, and as evidence we don’t have the bill,” Carmichael said. “Having said that, I’m not looking just to poke holes at any mistakes.

“I’m looking forward to finding a way through this process that gets us to what I believe is a tremendous benefit to the people of West Virginia — a tax cut on personal income and a balanced budget that barely increases spending.”

In addition to the delays over the revenue bill, there were delays because lawmakers were gathering to talk over the issues with each other.

The House was originally supposed to reconvene at 4 p.m. but Republicans were still caucusing at that hour.

Justice joined House Democrats in a caucus that lasted several hours Thursday afternoon, by which time House Republicans were expressing frustration over the pace and over not receiving the revenue bill first thing.

“As we gaveled in this morning, we still had not received the governor’s main tax increase bill – the first item on his special session proclamation – which he had claimed was widely supported by the Senate and key industry groups,” Armstead said.

“Now we learn the governor is still in back-room negotiations to come up with key provisions of this bill, all the while keeping all 134 members of the Legislature here at the expense of the taxpayers.”

Eric Nelson

More members of the House of Delegates, where little support appears for the budget in the first place, expressed frustration over today’s delay.

“The take is, why in the hell are we here?” said House Finance Chairman Eric Nelson. “We’ve wanted to talk about these items over the last couple of weeks. Greater discussions have gone on. But how can we be called in when we don’t have one piece of paper on this proposed bill yet?

“It’s costing taxpayers money, and we don’t need to be. We ought to just recess right now and come back in a week or two.”

Jim Justice

Appearing this morning on MetroNews’ “Talkline,” Justice said an agreement had been worked out with the coal industry over the sliding severance tax component of the revenue bill.

Particularly sensitive was a tax rate on metallurgical coal, which has rebounded in recent weeks because of international markets. Met coal producers have expressed concern about taking a tax increase when the market is just now rebounding.

“We’ve got a deal now, and a deal that helps everybody,” Justice said early Thursday. His request from the Coal Association, “Tell me something you would be happy with.”

The severance tax issue was just one of the factors in a swirl of politics before the special session began.

Justice said there’s no backup plan if a proposal from by his administration and the state Senate majority is rejected.

“I don’t have a second plan,” Justice said. “The good people of West Virginia should take note and take names.”

Justice, like other observers, was focused on what might happen in the House.

“If you get a vote out of the Senate 32-2, and you get the House to vote against this, you tell me how right that is?” he said.

Justice has been at loggerheads with the House Speaker because Armstead’s caucus generally believes the approach of the budget package is too heavy on tax increases.

Justice countered this morning, “”The reason we stall is the ideas coming from the Speaker are always the same.”

Armstead says the administration refused to meet with him over a period of more than two weeks until just before the special session began. Justice said Thursday his talks with Armstead have gone nowhere. The governor said he told Armstead, “I could have an inflatable Tim doll to sit in the corner with a button and have it say the same thing.”

There was plenty of other political movement ahead of the start of the special session too.

On Wednesday evening, Justice tweeted out and also emailed to Republican delegates a list of reasons he believes they should support a budget proposal being touted by his administration and Senate leadership.

And Senators had invited Republicans in the House to a 9 a.m. caucus to discuss the ins and outs of the budget proposal, which includes an income tax reduction embraced by Republicans in the Senate.

A podium was set up outside the Senate chambers with the expectation that heavy hitters such as Governor Justice and Senate President Mitch Carmichael will speak out in support of a budget deal this morning.

Meanwhile, some citizens groups aligned with the West Virginia Center on Budget and Policy, an economic think tank that tends to embrace progressive economic views, were also meeting and rallying to express concerns with some aspects of the budget package’s tax structure.

All those movements signify what’s taking shape today. The governor and the Republican majority in the Senate largely agree on a budget plan. But the Republican majority in the House of Delegates has expressed deep skepticism about the tax structure that is a part of the budget package.

“It’s not Democrat, it’s not Republican. It’s a plan for West Virginia, and I know each of you wants what’s best for the state,” Justice wrote in his memo to the House Republican caucus.

Four bills were set to be considered during the special session. A fifth bill authorizes payment for the cost of the session.

One is a revenue bill meant to be the main piece of a larger budget bill, two more deal with funding for highway and bridge improvements and the last deals with an average 2 percent payraise for classroom teachers.

MORE: Read the special session call

The package that will be under consideration blends the Senate majority’s desire to cut the state income tax with the governor’s tax proposals.

Within that revenue bill were a lot of moving parts.

The tiered system for severance taxes has been negotiated behind the scenes, with coal and natural gas representatives in talks with elected leaders; a controversial commercial activities tax is being switched to an increase in the corporate net income tax; and the proposal to reduce the personal income tax while raising the states sales tax has support in the Senate but faces skepticism in the House.

The revenue bill also includes a measure exempting military retirement from the personal income tax, additional lump sum taxes on those who make more than $300,000 a year, and an increase on tax credits for rehabilitation expenses on historic structures.

Legislators will also be considering the governor’s proposals to raise fuel taxes and fees at the Division of Motor Vehicles to provide millions of dollars in funding for highway and bridge improvements. He says that will create thousands of jobs and spark the state’s economy. The House majority would prefer to first let citizens vote on a bond proposal for highways.

Claiming his budget package will jumpstart the state economy through the income tax break and the funding for highways projects, Justice said it largely avoids the use of the Rainy Day Fund or the kind of cuts to higher education and healthcare that were included in a budget he vetoed last month.

“I don’t see how in the world any legislator can walk away from this opportunity. The vote needs to be 34-0 and 100-0 and signed by me,” Justice said last week when he announced his intention to call the special session.

“This is the opportunity of a lifetime in the most dire situation.”

The most resistance to the budget package is likely to come from theRepublican-led House of Delegates.

“I have heard from my members every day almost constantly about their concerns with this plan,” Armstead said Wednesday. “They’re not just digging their heels in saying no. We’ve come forward with proposals; we’ve come forward with ideas.

“Our members have very serious concerns about this, and to characterize this as if they’re just standing in the way is just wrong.”

At a gathering of community groups, policy analyst Sean O’Leary of the West Virginia Center on Budget and Policy, expressed concerns about the tax structure in the budget package being considered.

The center is concerned with the elements of the plan that would lower the state personal income tax, which is a percentage of earnings, while increasing taxes such as the state sales tax, which all citizens would pay regardless of income.

“There’s two major concerns with the compromise tax plans,” O’Leary said. “The first one is that it doesn’t really close our budget gap. It’s not a structurally sound plan. It has that staggered cut with increases happening first. So it creates revenue in year one and next year we’re right back here with a budget gap.

“Beyond that, when the compromise becomes an overall reduction and you look at who’s getting a tax increase and who’s getting a tax cut, you’d be having a more regressive tax system. And because it doesn’t actually create revenue, you’d be asking most West Virginians to pay for a tax cut for wealthy West Virginians.

“That’s a real problem for West Virginia.”

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