Gov. Jim Justice says West Virginians who are concerned about how his big tax proposal would affect their pocketbooks should believe the plan will result in population growth.
“We have struggled to generate population growth in West Virginia,” Justice said. “This will do it.”
That was Justice’s answer to a range of questions during his most recent town hall discussion of his tax plan, which would cut personal income taxes by 60 percent but raise a variety of other taxes to make up for it.
An outline of the governor’s plan estimates tax reductions totaling $1,035,650,000 and rebates totaling $52 million — but also tax increases of $902,600,000 to make up for most of those breaks.
In response to a questions about how increasing taxes on soda pop would affect retailers and restaurants depending on those sales, Justice has said population growth would result in more people drinking soda.
Responding to questions about how lawyers, accountants and other professionals would absorb newly-levied sales taxes on their services, Justice said population growth would bring more business.
“People are going to come to the border counties to live,” Justice said.
After releasing a 78-page draft of his tax bill on Thursday, the governor continued selling the concept. Toward the end of the town hall, he advised citizens to call their legislators. And he said he has been talking to legislators themselves.
“A no vote is a vote telling people we do not want you to have more money in your pockets and we do not want you to have more money than you have today,” Justice said at the town hall.
Senate President Craig Blair said today the income tax cut has his full support.
“I could vote for the governor’s bill as it stands right now,” Blair, R-Berkeley, said on MetroNews’ “Talkline.” “It is going to put more money in the pockets of working West Virginians.”
Blair was less specific about the aspects of the plan that would raise taxes. He said senators in the Republican majority would start gathering today to assess the overall plan.
And he said what the Senate winds up considering could differ from what the governor has put out.
“They’re going to look at it as a collective,” Blair said of his Senate colleagues. “We’re not going to vote in a tax increase on the working people of West Virginia.
“How we go about doing the taxing, though, will change some.”
.@CraigPBlair speaks with @HoppyKercheval about the Governor’s income tax plan. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/XodJ1DZU6m
— MetroNews (@WVMetroNews) March 5, 2021
Kelly Allen, executive director of the West Virginia Center for Budget & Policy, said state residents shouldn’t take promises about the tax plan at face value.
“Based on our own experiences in West Virginia, cutting taxes does not guarantee job or economic growth,” Allen said. “From 2007- 2015 we slashed $425 million/year in taxes and what followed was the worst job growth in the nation.”
She notes that the governor’s plan is built by eliminating income taxes, which tax people based on their ability to pay. But raising sales taxes can inordinately affect lower-income citizens.
“Overall, this plan is a significant tax cut for the wealthiest West Virginians paid for by shifting taxes to the vast majority of families in our state who are low- and middle- income,” Allen said.
The changes also seem destined to affect the state budget, she said.
“As currently structured, the proposal has a $185 million deficit. When combined with the governor’s flat budget which results in a cut by not keeping up with inflation, we are potentially looking at a 5-6 percent cut to public services during a pandemic. And that is before offsetting new costs associated with bills the legislature is passing. It’s important for the governor to clarify exactly what cuts he envisions.”
The governor proposes a variety of changes to offset the income tax cut:
— 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.
National assessments show that 7.9 percent rate would blow past the highest state sales tax in the country.
The increased consumer sales tax is anticipated to bring in an additional $475 million.
— The governor’s plan establishes an additional “luxury” tax. That has a sliding scale of goods above $5,000 being taxed at an additional 3 percent up to goods above a million dollars being taxed an additional 1 percent. The bill describes luxury items as jewelry including watches, clothing including furs, furniture, motorboats, snowmobiles, ATVs, yachts and airplanes.
— Justice proposes increasing the tax on soft drinks. Taxes on tobacco products, beer, wine, and liquor will also be raised. 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.
— 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.
State officials envisioned the new 7.9 percent sales tax rate applying to those economic sectors.
At the same time, the governor’s plan does not apply the income tax break to “Schedule C” businesses — sole proprietors.
A citizen who submitted a question to today’s town hall was particularly concerned about this. “I just read your proposal and it will kill many businesses such as mine,” said the citizen, identified as Greg of Kenova.
Justice responded, “If you’re one of the professionals we’re talking about, putting you into the same category as a plumber or an electrician that pays the tax all the time — just step back and think about it. For the most part, the more wealthy people are using those services more than the poorest people. The more wealthy people are going to more easily be able to afford a slight increase than the people in our lower brackets.
“From the standpoint of the professional services you can pass along the tax we put on the professional services if you choose to do so. Or if you choose to be very, very competitive with your neighbors you can find a way to maybe eat part of that yourself. But the biggest thing that’s going to happen is just this: Where you have X amount of business today, if we do this and bring you a multiple of times of business, are you not going to be better off?”