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Justice sees flaws in Senate tax plan, and he wishes somebody had looped him in

Gov. Jim Justice says he likes some aspects of a new Senate tax plan and really dislikes several others: fewer business groups “pulling the rope,” the loss of rebate checks for lower-income residents and reinstitution of the food tax.

And the governor wishes someone had taken just a couple minutes to call him about the plan.

“I’m disappointed beyond belief that nobody ever consulted with me after I’ve done everything over and over and over with the leadership of both the House and Senate, keeping them abreast of where I was going on every turn and asked for their input in any way,” he said, describing the process for the tax plan he has been pushing.

He said that slight wouldn’t prevent him from working with lawmakers.

“I’m not a baby. I think it’s disrespectful. You know, surely to goodness as much work as they’ve put into this plan they could have called me up on the phone and said ‘What do you think about this? What do you think about this?’ or come and seen me. But that’s disrespectful and everything, but I’m a big boy, and I want to work for the people of West Virginia. I don’t want to get into all this politics junk.”

Today was Day 50 0f the 60-day legislative session.

Justice has been touting his tax plan for weeks. The House of Delegates passed its own plan on Friday without ever bringing Justice’s before a committee.

The Senate Finance Committee on Monday substituted its own plan into the House bill. Senators who serve on the committee objected that a copy had been provided to the national Tax Foundation for review several days before they laid eyes on it themselves. “It seems like they got it before senators did, which is a little odd,” commented Senate Minority Leader Stephen Baldwin, D-Greenbrier.

The version introduced in Senate Finance would cut the personal income tax initially by $1.09 billion.

It would offset that cut with a variety of tax increases anticipated to be $890 million.

Justice said he still believes compromise is possible.

“I’m very, very hopeful that we can work together,” he said. “There are things we probably need to do for me to get on board.”

He said there are several aspects of the Senate plan he likes. “I’m pleased with the fact that the Senate went large, just like I did.” And he likes the fact that pass-through businesses — like C corporations and S corporations — get an income tax break. Justice’s plan exempts businesses structured that way until a full phase-out he envisions a few years from now.

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.

“Burden on those who are struggling”

The governor said the Senate plan loses the balance — letting many of the businesses off the hook while maintaining a burden on lower-income individuals.

“The regretful thing is it places an incredible burden on those that are struggling and having lower incomes, and it lays a big burden on their back. Not only does it lay a big burden on their back, but there’s nothing in it for the tax rebate checks that I had for people making up to $35,000,” he said.

The Senate proposal would raise the current sales tax from 6 percent to 8.5 percent. The governor had proposed 7.9 percent.

Without the other breaks, he said that Senate rate is too much.

“It goes way, way, way too far for the people in the income brackets $35,000 and less,” he said. “If you don’t turn around and give them cash rebates back, it’s going to get in their pockets big time. And that’s just not acceptable to me.”

And Justice objected strongly to reinstituting the food tax.

“It has in there a food tax that I cannot be for in any way. I would not do that no matter what because I absolutely do not see that we need to put that right in the fact of those who are having the most difficult time.”

The Senate bill proposes reintroducing a grocery tax at 2.5 percent.

When they were the minority party in West Virginia, Republicans in the House of Delegates made elimination of the food tax a centerpiece of their agenda. When the food tax was finally eliminated in 2013, then-House Speaker Tim Armstead commented, “For the first time in 24 years, our citizens can put food on their tables without paying this truly immoral food tax.”

Eric Tarr

Senate Finance Chairman Eric Tarr, R-Putnam, said today on MetroNews’ “Talkline” that he views the tax differently.

“Republicans did try hard to get rid of that years ago. And I think it was a mistake,” Tarr said. “And the reason I think it was a mistake is because that is a very broad, very stable tax source that is also shared by people who pass through West Virginia.”

Pull the rope

Meanwhile, the governor has been asking for various industries to “pull the rope” to accomplish the income tax cut. The Senate bill doesn’t have the tiered tax structure for coal, oil and gas. It also has no additional tax on alcohol. And the luxury tax is gone.

“The lobbyists are controlling the day, are they not, when it really boils right down to it. The coal industry has probably bought its way out of an obligation, the gas industry the same thing, the soda tax, liquor,” Justice said. “You know, in my opinion that’s just not right. All we’ve asked really of the natural resource industries was just to step up when things are really, really, really good.”

Justice said better balance is possible for the plan.

“I don’t want anyone in our state to have to hurt for the benefit of somebody else,” the governor said. “There’s a way to do this without doing that. You don’t have to make the people that are struggling hurt so the people that aren’t struggling will benefit. There’s a way to do all this.”

AARP West Virginia issued a statement this week urging state leaders to be careful about the tax tradeoffs.

Gaylene Miller

“The latest research demonstrates no clear positive relationship between cutting income taxes and economic growth, and recommends well-balanced and broadly applied progressive taxation using a combination of income, sales, and property taxes to ensure that West Virginia can generate sufficient revenue to provide essential services,” stated AARP West Virginia state director Gaylene Miller.

“Experiences of other states offer a real-life cautionary tale: no measurable economic effect, but failure to provide essential, basic services that older West Virginians depend on. Initiatives to retain adequate revenue as part of any tax reform effort should not rest on the backs of those West Virginians who can least afford it.”

A group called West Virginians United plans an 11 a.m. Friday rally at the Capitol against the current incarnation of the bill.

Kelly Allen

The West Virginia Center on Budget & Policy think tank agrees lower-income residents would bear an outsized burden.

“We’ve now seen three plans to eliminate the income tax, and they all ask working families to sacrifice for tax cuts for the wealthy and an empty promise of growth,” said Kelly Allen, executive director, concluding that the Senate plan would be a net tax increase for the average taxpayer in the bottom 60 percent of households.

Time on the clock

The governor, the Senate and the House seem far apart, but Justice says the timing is crucial.

“First of all, it takes a lot of work. Secondly, the whole world’s looking at us right now and really that will pass,” Justice said, alluding to the national attention his administration has received for its solid handling of the covid-19 pandemic.

“Every single day that that goes by with the world looking at you, if you don’t look back it’ll pass. To get together this summer and talk about it again, sure there may be an opportunity to do that, but I’m telling you right now is our time.”

Day 60 of the 60-day legislative session is coming up fast, April 10.

“It will be the miss that we will regret forever,” Justice said, “if we let this happen.”

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