The West Virginia Farm Bureau is the latest group hatching serious concerns about Gov. Jim Justice’s big tax proposal.
“Running a farm or ranch is challenging under the best of circumstances, because agricultural businesses operate in a world of unpredictable markets, weather disasters, fluctuating input costs — and, under Justice’s plan, a significant tax increase,” Charles Wilfong, president of the West Virginia Farm Bureau wrote in a Charleston Gazette-Mail op-ed today.
Justice should be familiar with those concerns. His family business has significant agriculture holdings, farming 50,000 acres in four states. During his 2016 campaign for governor, Justice regularly called agriculture a “sleeping giant” and touted identifying a “niche crop” for West Virginia. The governor is a seven-time national corn growing champion.
Here the governor finds himself at odds with the West Virginia Farm Bureau, an influential organization representing 17,000 farming families.
The governor’s plan would cut a billion dollars in personal income taxes while raising a variety of other taxes, particularly sales tax.
The income tax cut would not apply to many businesses that are essentially organized as sole proprietors under the tax code. So, many have concluded their businesses would be affected by the sales tax increase but would not receive the benefit of the income tax reduction.
The governor has said the business categories that are currently exempted from the income tax cut would benefit once the state moves to eliminate the income tax entirely. But there are not details so far on how or when that would be done.
“Unfortunately, his plan also would impose costs on family farmers,” Wilfong wrote. “Unlike many businesses, farms operate as commodity-based businesses, so they can’t pass extra tax costs on to consumers of their products.”
The Farm Bureau has taken its position just a couple of days after Justice decried pushback from lobbyists.
The West Virginia Beverage Association was the first group to publicly oppose the tax plan. Then at midweek, the broad-based West Virginia Business & Industry Council provided a memo to legislators pointing out several specific concerns with the plan.
Justice went after those groups at his most recent town hall, describing them as greedy lobbyists.
“You’re going to see an orchestrated effort by those out there that are probably thinking penny-wise and pound poor,” Justice said near the beginning of Thursday night’s event. “They’re good people. But they’re thinking selfishly to tell you the truth.”
Justice has proposed counteracting a portion of the major income tax cut with higher taxes on several goods and services, including advertising, professional services and tobacco products, Wilfong noted.
Wilfong pointed out that farm income is one of several income tax categories that would not receive benefit from the governor’s tax proposal. Income tax filers that wouldn’t get a break under the governor’s plan include:
- Schedule C Business Profits;
- Schedule E Rents, Royalties and Pass-through Entity Profits;
- Schedule D Capital Gains; and
- Schedule F Farm Income.
“Many family farms are pass-through entities and, as such, for any tax reform that would help farming, those revenues must experience a reduced rate of tax similar to that from regular employee income,” Wilfong wrote.
The West Virginia Farm Bureau says it would like to participate in changing the plan.
“We understand the tax reform plan has a long way to go to become law. We want to be at the negotiating table, to make sure it is a good product that would protect agriculture and help West Virginia grow,” Wilfong wrote.
“A decision to place additional tax burdens on West Virginia farms would make our farms less competitive and could discourage the next generation from getting into the business of production agriculture. We ask Gov. Justice and legislators not to tax away our farms.”
Those are similar to the concerns expressed earlier in the week by the West Virginia Business & Industry Council, which represents retailers, manufacturers, gas and mining companies, contractors, auto dealers, professional services, hospitals, realtors, foresters, beverage and beer wholesalers, telecommunication providers and more. That broad base makes it influential with West Virginia legislators.
“The proposal reduces the personal income tax obligation of an individual wage earner based on their income level but does nothing to benefit a business,” the organization wrote in a memo signed by chairman Mike Clowser.
“The majority of West Virginia businesses are operated as sole proprietors, limited liability companies limited partnerships or general partnerships. As we understand the proposed legislation, owners of these businesses will see no benefit from the plan.”
The governor is proposing a 60 percent cut in the state personal income tax, suggesting it will be a splash that will encourage population growth. He would like to eliminate the tax entirely within three years or so, banking on that growth.
The income tax accounts for about $2.1 billion of the state’s tax base, about 43 percent of the General Fund to pay for government services like education and healthcare.
An outline of the governor’s plan estimates initial personal income tax reductions totaling $1,035,650,000 and rebates totaling $52 million for lower-income residents — but also tax increases of $902,600,000 to make up for most of those breaks.
The proposal would also raise a variety of other taxes, including on soft drinks, tobacco, beer and wine. And Justice proposes taxing some professional services for the first time, including law offices, accountants, gyms and more. He also advocates a “luxury tax” on some items costing more than $5,000. And he proposes sliding scales for severance taxes for coal, oil and natural gas, paying more when markets are better.
Justice refers to the additional taxes as pulling the rope.
He said those businesses should be willing to pay the same taxes as electricians and plumbers. And he promised population growth from his tax plan would bring even more business to West Virginia.
“Please don’t let a bunch of lobbyists that are running Washington today run West Virginia,” the governor said.
He later added, “You can’t let the lobbyists take away your opportunity. And if you do, you can’t blame me. You can’t blame me. I’m really, really trying to help you.”