There is trouble on the horizon for Governor Jim Justice’s proposed 60 percent cut, and eventual elimination, of the state income tax.
Justice believes that without a state income tax, West Virginia will become a destination for individuals and businesses.
Justice is a Republican, and Republicans have supermajorities in the House of Delegates and the Senate, so you would think the skids are greased.
However, it is the second half of Justice’s plan that is giving some in the GOP heartburn.
The Governor’s bill includes raising the consumer sales tax from the current six percent to seven-point nine percent. In addition, the sales tax exemptions for some professional services would be eliminated, taxes on tobacco, liquor, beer and wine would rise and luxury items would be subject to a new tax.
Republicans like to cut taxes, not raise them.
Meanwhile, support for the plan from an influential business group is wavering. The West Virginia Business and Industry Council has sent a letter to every member of the Legislature posing a series of questions and concerns.
“We applaud Governor Justice’s initiative to do all he can to make West Virginia the most attractive state in the nation to live and work,” BIC said, “but our members have concerns over the impact this income tax plan will have on every West Virginian and West Virginia business.”
The organization said the tax plan “does nothing to benefit a business” because the income tax reduction would not apply to the majority of West Virginia businesses that operate as sole proprietors, limited liability companies or general partnerships.”
BIC calls for “study, debate, and public input in order to develop a comprehensive tax restricting plan.”
Wisely, Justice’s plan does not call for simply the elimination of the tax without a replacement. That would leave the state with a mammoth hole in the budget. The state income tax raises over $2 billion annually, or about 43 percent of the General Revenue Budget.
But to make up for the lost revenue, Justice has had to find additional tax revenue from a variety of sources. Each one of those sources impacts any number of individuals and businesses. They are not going to quietly acquiesce.
During a town hall Thursday Justice pushed back against BIC and other groups raising questions about the tax plan.
“You’re going to see an orchestrated effort by those out there that are probably thinking penny-wise and pound poor,” Justice said. “They’re good people. But they’re thinking selfishly to tell you the truth.”
That is not the best strategy. Justice needs the support of BIC and others for his bill to have any chance of success.
BIC’s letter to lawmakers includes six specific areas of “immediate concern” with the legislation. Justice’s job is to meet each one of them head on and provide convincing arguments, otherwise his bill will have trouble even getting out of the gate.