Gov. Jim Justice says he has a proposal to phase out West Virginia’s personal income tax ready for legislative consideration.
“Today, March the Fourth, is a day West Virginia will remember forever and ever,” the governor said today on MetroNews’ “Talkline.”
What the governor envisions would cut personal income taxes by 60 percent starting next Jan. 1. He envisions a full phase-out perhaps within three years.
All lower income brackets less than $35,000 a year will receive a tax rebate check under the plan — although it wasn’t immediately clear how much per person. Low income and high income taxpayers will all see a net positive benefit if this plan is enacted, Justice contends.
He has been talking about an income tax phase-out since the day after the General Election, touted the big idea during his State of the State address and has had a series of town hall events to promote the concept.
But there has been nothing in writing until now. He acknowledged this morning that a bill is not yet in the hands of lawmakers but said it is undergoing some final adjustments.
“Later today we’ll have the official bill out,” he said. “We’re just doing some additional scrubbing to make sure everything is the way it’s supposed to be.”
The personal income tax brings in $2.5 billion a year for services like education and healthcare, about 43 percent of the state’s general fund.
Justice proposes some tradeoffs to make up for that cut. In an announcement today, he called that “pulling the rope.”
An outline of the governor’s plan estimates tax reductions totaling $1,035,650,000, rebates totaling $52 million — and tax increases of $902,600 million to make up for most of those breaks.
That’s still a $185,050,000 difference.
— The state consumer sales tax would increase from 6 percent to 7.9 percent. That would be on top of the sales tax that some municipalities already add on.
“Even at that rate we’re still not going to be up anywhere near the highest sales tax in the country,” state Revenue Secretary Dave Hardy said today.
The increased consumer sales tax is anticipated to bring in an additional $475 million.
— Justice described a “small, single-item luxury tax for certain high-value luxury items that only the very wealthy typically purchase.” He did not say how much that would be.
The governor’s estimate suggests that would bring in $20 million.
— Under the Governor’s proposal, professional services, such as legal and accounting services will pay the same tax rate as skilled trades like plumbers and electricians. The consumer sales tax base will be expanded to include computer hardware/software, legal services, accounting services, other professional services, selected advertising, electronic data processing, and health and fitness memberships.
Justice contended, “These professional services will see a very substantial increase in business as people on the outside begin to migrate to West Virginia.”
State officials envisioned the new 7.9 percent sales tax rate applying to those economic sectors.
Hardy says taxing those sectors would bring in about $180 million.
— Justice proposes increasing the tax on soft drinks, but didn’t say how much. Additionally, taxes on tobacco products, beer, wine, and liquor will also be changed. Cigarettes would be taxed at $2.25 a pack.
— Justice’s plan also calls for a tiering system to be put in place for natural gas, oil, and coal severance taxes so that when times are good, “these companies throw a little more in the collection plate, and when times are bad, the state steps up and lowers severance tax so that their critical jobs are protected.”
A composite of what the governor proposes has several tables showing the possible rates.
Justice contends the income tax plan — despite the tradeoffs — will result in growth for West Virginia.
“I can’t imagine being a lawmaker and saying to the public we’re going to keep you from receiving more money,” he said. “Or saying to the public we’re going to keep you in this rut of losing population. We really need to be united in a bipartisan play or we’re just going to play politics with the lives of West Virginians, and I think that’s a mistake.”