Income tax cuts soon could be pulled from W.Va. revenue plan

CHARLESTON, W.Va. — Debate could be ending sover whether income tax cuts belong in a revenue package meant to balance West Virginia’s budget.

Ryan Ferns

If members of a conference committee don’t unite around the concept of income tax cuts as part of a revenue deal by Monday, the income tax portion is likely to be removed, Senate Majority Leader Ryan Ferns told his hometown newspaper.

“On Monday, we’ll get a sense of what support there is and know if we’re going to do tax reform at all,” Ferns (R-Ohio) told the Wheeling News-Register on Friday.

“If we can compromise on triggers — and bring back legislation that will get support — we’ll know Monday. If we can’t get it, we’ll abandon all attempts at tax reform,” Ferns said.

The conference committee was set up to iron out differences between revenue bills that passed the House and Senate. The result is meant to be a key component of a proposed $4.35 billion budget bill.

Senate Republicans have expressed enthusiasm about personal income tax cuts for months, starting in the regular session with the work of the Select Committee on Tax Reform. They believe the cuts will result in economic growth.

Gov. Jim Justice publicly backed the cuts starting the last night of the regular session, working closely with the Senate Republicans on a deal that also included his desire for $2.8 billion in spending on roads and bridges.

But the other groups involved — House Republicans, House Democrats and Senate Republicans — have expressed doubt, demonstrating their reluctance during multiple votes against the plan.

On Friday, it didn’t sound like any of those groups were any closer with their support.

Both Republicans and Democrats in the House of Delegates on Friday questioned whether it was even worthwhile to extend the work of the conference committee.

Eric Nelson

Eric Nelson (R-Kanawha), the House Finance chairman who is co-chairman of the conference committee along with Ferns, found himself being questioned on the floor by skeptics from his own party.

Delegate Ron Walters, a longtime friend and Republican colleague, wanted Nelson to clarify: “Our conferees are set on the position that we agree on the reduction of the income tax?”

Nelson responded, “No, I can’t say that.”

Tim Miley

House Minority Leader Tim Miley spoke on the floor, urging his fellow delegates to give the conference committee more time. But Miley made it clear that his request was made out of respect for those on the committee, not because he supports the plan.

“I don’t like giving this extension because I think we’re delaying the inevitable,” Miley told fellow delegates. “Let’s give one small window of opportunity would be my request to you.”

Miley added, “I may not be voting for what the conference committee comes back with, but I want to make sure they come back with something.”

He also advised: “Be prepared for Plan B when we come back.”

Roman Prezioso

Senate Minority Leader Roman Prezioso, who is serving on the conference committee, questioned the wisdom of the plan Friday on the Senate floor, kicking off a long argument where Democrats questioned the plan and Republicans tried to defend it.

Prezioso called the triggers built into the plan to activate future reductions of the personal income tax a matter of “Russian roulette” — a guessing game that could result in major holes in coming fiscal years.

“Everybody’s afraid of eliminating the personal income tax,” Prezioso said. “That’s the problem we’re dealing with.

“This thing isn’t right. It’s not right. I’ve got so many trigger options right now that I’m getting gun shy.”

The plan the conference committee is considering would raise the sales tax to 6.5 percent and extend the sales tax to some economic sectors that have been exempt — like telecommunications, communications industries and digital downloads.

It has included a Justice-backed proposal for tiered severance taxes giving coal companies a break when prices are low and raising taxes when prices are higher.

And the most contentious aspect has been proposed reductions of an average 7-percent personal income tax reduction on Jan. 1, 2018, followed by triggered reductions of 7 percent and 6 percent in the years after that.

One of the tasks of the committee was supposed to be determining what would cause the triggers, which could be tied to a variety of factors such as state revenue growth, job creation, sales tax collections or the state Rainy Day fund.

Between the increases and the cuts, the plan is estimated to raise about $89 million in new revenue for the coming fiscal year’s budget. But it raises less and less as the first round of income tax reductions goes into effect.

Criticism has been leveled for several reasons.

One is doubt that the state can handle cuts when it’s already struggling with the budget. Another is the other taxes having to be raised to contend with the income tax cuts. And, finally, the concern that lower- and middle-class wage earners would be particularly vulnerable to having their income tax reductions swamped by increases in the other taxes.

Jim Justice

Justice has put forth significant effort to support the plan, serving as chief negotiator among the various caucuses, caucusing for several hours last week with doubtful Democrats in the House and then appearing before the conference committee for more than an hour to state his views.

During a news conference last week, Justice said he has supported the income tax reductions because Senate Republicans have consistently expressed that as a top desire.

“The Senate, just think of how much they’ve given, how far they’ve come,” Justice said. “They started out with a 20 percent reduction in the income tax. Then they were willing to go 15 in one year and 5 in the next. Then we went to 12 to 8. Then we went to 7,7 and 6. Then we went to 7 and triggering and 7 and triggering and then 6.

“Let’s be fair. They’ve come a long, long ways. Because they’ve wanted to help.”

Justice said he feels comfortable with the triggers that would result in personal income tax cuts in future years.

The governor said how much a broad income tax reduction would stimulate the economy is a matter of debate. But he said he believes in giving a tax break to average West Virginians — although other taxes, like the sales tax, would increase in response.

“I personally believe that lowering the income tax 7 percent or another 7 or a 6, it is argumentative if that’s going to bring people to our state,” Justice said. “I personally believe it will be a great move for our image and a great move to potentially bring people to our state.

“But here’s the fact that’s not argumentative: At 7 percent and triggering, we are completely safe from the state standpoint. We are completely safe and the numbers completely work. And here’s the thing: If the numbers work and you were completely safe, why would you not want to give money back to the guy that’s mowing the grass out here?”

The conference committee considering those issues consists of Ferns, Nelson, Prezioso, Republican senators Craig Blair and Ed Gaunch, Democratic Senator Glenn Jeffries, Republican delegates Carol Miller and Paul Espinosa and Democratic delegates Brent Boggs and Dave Pethtel.

The group was named Wednesday and met for the first time for about an hour that afternoon. The committee heard from Justice for about half of its two-hour meeting Thursday morning and then met Thursday afternoon for 12 minutes.

The committee was supposed to meet at 10 a.m. Friday but delayed to 10:30, then to 11:30, then to 1:30 and finally met at 4 for about 10 minutes. The times they’ve met, committee members have heard about and asked for more information about how income tax reduction triggers might work.

When dismissing the committee Friday afternoon, Nelson suggested the group would benefit from thought over the weekend.

“I think now’s a good time to take what we have and think of it over the weekend,” Nelson said. “Let’s come back Monday morning and decide where we go with this conference report.”

By then, he said, the committee would “have slept on it, prayed on it, and come to a good solution.”

The committee is scheduled to return at 9 a.m. Monday in the House Finance Committee meeting room.

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