The House Finance chairman says an income tax proposal that rolled out of committee this week has “wow factor.”
“Real money, real dollars, citizens getting tax relief every year, that’s the wow factor,” House Finance Chairman Eric Householder, R-Berkeley, said today on MetroNews’ “Talkline.”
The bill passed out of House Finance on Monday afternoon before it even had a number, sponsors or a fiscal note. Now named House Bill 3300, it rolls next to the House floor, where the Republican supermajority seems primed to back it.
A virtual public hearing the House income tax reduction plan was announced for 3 p.m. Thursday. Register to speak by calling 304-340-3230 between 1 to 2 p.m. Wednesday.
Eric Householder, https://t.co/rn6maOkkqD. State Delegate (R-Berkeley), joins @HoppyKercheval to discuss the House tax bill. WATCH: https://t.co/yCFQ3nm85Y pic.twitter.com/7dA5jZ1aLE
— MetroNews (@WVMetroNews) March 23, 2021
In addition to “wow factor,” though, it has complications.
The House proposal is a more incremental approach than what the governor has proposed, outlining gradual income tax elimination over 12 years. It would establish a “personal income tax reduction fund,” allowing tax rates to be reduced when the fund reaches a set threshold. The first envisioned personal income tax cut is $150 million. And there could be cuts of $150 million a year from there on out.
That money would need to come from somewhere. With no fiscal note yet, it’s unknown what those cuts would be. Traditionally, the easiest places for state government to cut in tough times have been higher education and healthcare.
“The easy part is the path that we want to get rid of the income tax,” said Delegate Joe Statler, R-Monongalia. “The tough part is how bad do we want to get rid of the income tax.”
The other big complication is Gov. Jim Justice.
At the very same moment House Finance was passing his bill, Justice was holding a roundtable of business leaders and pushing back against criticism.
“West Virginians, you’ve got to listen to me,” the governor said. “You’ve got special interests that want to keep you in your place. They want you to know your place and you stay in it. All of us right here are trying to help you come out of tough times into prosperity and good times. Literally, literally, you’ve got special interests bombarding the legislators.”
Justice proposes one big whack of the income tax — a 60 percent cut in year one. And the governor envisions elimination within three years.
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.
The possibilities of increased and expanded taxes have generated concern among business groups and lawmakers.
“The governor’s plan, I believe, penalized a lot of small businesses,” Householder said today.
Householder said he met privately with the governor, advocating the House proposal. Householder said that plan could cut $450 million in income taxes by the time the governor’s term ends in three years.
“I think it’s a better approach than what the governor has proposed,” he said.
“We’re doing something more responsible, more moderate, more predictable.”
Still, there are questions about the House proposal too.
Kelly Allen, executive director of the West Virginia Center on Budget & Policy, said the math doesn’t add up.
“While the tax cuts ‘only’ cost $150 million in the first year, they quickly grow to cost $1 billion of our state’s $4.5 billion budget by year seven,” Allen said.
“The plan also diverts existing revenue that is already funding current budget needs into a fund designed not to offset the revenue loss, but to accelerate it. This plan would force budget cuts that could wipe out 20 percent of public services by year seven, far exceeding any savings the average West Virginia household would see.”
She suggested the bill passed out of committee with no fiscal note and no discussion of what public services would be cut to pay for the first $150 million by design, “likely because the resulting cuts will be deeply unpopular and unpalatable to both legislators and West Virginians.”
Delegate Ed Evans, D-McDowell, said on WJLS Radio this morning that he needs to examine House plan more thoroughly.
“That bill is substantially different from what the governor sent out,” Evans said.
Evans isn’t sold on the governor’s plan either.
“It really has become a cannonball.”