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Competing tax plans get a public airing out in West Virginia

If one income tax proposal wasn’t enough to figure out, now West Virginians have two.

Gov. Jim Justice introduced a 60 percent cut in the personal income tax a few weeks ago, offsetting the reduction by increasing and expanding sales taxes.

The House Finance Committee this week passed a different proposal that would cut at least $150 million in income taxes a year over a 12-year span. That proposal does not contemplate any other tax increases to make up for the cut and has already raised questions about how to sustain government services with compounding income tax cuts over the long haul.

If that’s not complicated enough, there’s a political element of trying to guess how or if the governor and the Legislature might or might not wind up with anything they can agree on.

Stephen Baldwin

“It remains to be seen what the Senate supermajority is going to do,” said Senate Minority Leader Stephen Baldwin, D-Greenbrier, speaking today on “Radio Roundtable” on WJLS Radio.

“They’re not wild about the governor’s plan. They’re not wild about the House plan. They want to do it a different way. But are they going to introduce a third version?”

Today is Day 43 of the 60-day annual legislative session.

Baldwin acknowledged an income tax bill could bounce between the chambers for the remainder of the session. And if the governor would dislike the result enough to veto it, there might not be time left for lawmakers to override.

“So there’s a chance nothing gets done,” he said.

There are opportunities for the public to learn more about both proposals.

A virtual public hearing on the House income tax reduction plan,  House Bill 3300, was announced for 3 p.m. Thursday. Register to speak by calling 304-340-3230 between 1 to 2 p.m. Wednesday.

Governor Justice has been continuing a series of town hall events to discuss the tax plan. One event to promote his plan was Tuesday in Morgantown. A public town will be today at 4 p.m. near Beckley.

Asked about the two plans at the Morgantown event, Justice said he is willing to negotiate.

“I have been with these people a thousand times in trying to say what’s your ideas, what do you not like, let’s move this, move that – still willing to do it,” the governor told WAJR Radio.

But Justice said any plan must meet three parameters:

“First of all, we can’t put all the burden on the low-income wage earners. That’s not fair,” he said.

“The next thing we have to do is we’ve got to go big enough that the people on the outside believe you’re going to do it. Because if they don’t believe that, they’re not going to come. There’s no way they’re going to come.”

“And the other thing is, without any question the bigger you go, the more money in people’s hands and the more it will help our small businesses.”

The West Virginia Center on Budget & Policy, a progressive think tank has been assessing both plans. The organization has been critical of Justice’s plan because it cuts a tax that is based on the ability to pay and largely replaces that with sales taxes that don’t take means into consideration.

But in assessing the House plan, analysts with the think tank acknowledged that at least the Justice plan attempts to balance the state’s finances.

Sean O’Leary

“The House Finance plan is bad. It’s so bad that it makes me sort of long for the governor’s bill,” Sean O’Leary, an analyst with the think tank said during a livestream discussion on Wednesday.

He concluded of the House plan, “It would be devastating to the state budget. It has no pay-fors. There is no offsetting revenue. There is no safety net. There is no cushion. There is no trigger. There is no responsibility to this plan.

“It basically says every year, no matter what else happens in the state, no matter what the budget looks like, no matter what is going on in the economy, we’re going to cut the income tax by $150 million.”

Eric Householder

House Finance Chairman Eric Householder, R-Berkeley, has pitched that proposal as a more incremental way to cut the income tax.

“It gives tax relief in the amount of $150 million a year,” he said this week on MetroNews’ “Talkline.”

“It doesn’t shift any taxes. It doesn’t increase any taxes. It doesn’t do a huge tax relief at first.”

The bill outlines an annual cut of that amount, assigning the state Tax Commissioner to recalculate tax brackets each year to reflect a $150 million cut overall.

An assessment from the Division of Regulatory and Fiscal Affairs anticipates the first-year impact would be $31.9 million because of a difference between the calendar and fiscal years. That assessment also takes into account natural economic growth that would bring in more income tax collections year over year.

In addition to the $150 million annual cut after that, the bill would set up a “personal income tax reduction fund” that would fill up with other sources, including Lottery proceeds. This is meant to accelerate the overall pace of income tax reduction.

When the fund hits $400 million, it would shift $100 million of that to the General Fund “to provide a cushion for an additional permanent $150 million in personal income tax reductions.

So the income tax reductions could amount to as much as $300 million a year.

The fiscal note released today anticipates a full phase-out of the personal income tax — a total of $2.1 billion — by fiscal 2035.

“What do you do if things were to go totally bad? At any time you could stop,” Householder said.

Doug Skaff

House Minority Leader Doug Skaff said today on “Talkline” that he sees flaws with both the governor’s plan and the House GOP proposal.

Skaff characterized the governor’s version as a tax shift. He suggested the plan before the House is an annual $150 million cut that would compound over time, raising questions about the sustainability of government services.

“Both of these plans have their flaws,” he said.

Skaff suggested further examination — or a one-year attempt to see the effects of a $150 million cut.

“It’s hard for me to vote on something that affects legislatures for the next dozen years,” he said.





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