Delegates passed a bill that could lower West Virginia’s personal income tax rates.
House Bill 4007 would prompt an initial 10 percent cut for each bracket while also establishing a savings fund for possible future cuts.
Delegates voted 76-20 to pass the bill, which now goes to the Senate. Its support there is not as clear.
“It’s probably inevitable that once it’s passed it will go to the other side, and it will probably not come back in the same form that it is now,” said Delegate Brent Boggs, D-Braxton.
House Finance Chairman Eric Householder spoke in favor of the bill, saying “West Virginians will find more money in their pockets to save or spend on what they care about.”
The bill would lower each of West Virginia’s five tax brackets by 10 percent starting Jan. 1, 2023.
So the highest, 6.5 percent, would be reduced to 5.85 percent. The lowest, 3 percent, would be reduced to 2.7 percent.
“We want to cut taxes for the people of West Virginia,” said Delegate Danielle Linville, D-Cabell. “This is a very substantial cut for the people of West Virginia and allows them to have more money in their pockets rather than burning a hole in the pockets up here in Charleston.”
The other aspect of the bill would establish a savings fund that could be used to cushion future cuts if legislators choose to make them.
The account, called the “Stabilization and Future Economic Reform Fund” — or SAFER — would draw money from any revenue surplus the state runs at the end of the fiscal year.
Right now, the state takes 50 percent of year-end surplus and pumps it back into the general fund. The other half goes to rainy day funds.
The current balance in West Virginia’s rainy day accounts is historically healthy, almost a billion dollars. As of June 30, the amount was $995 million, according to state figures.
So the bill would divert that year-end surplus from the rainy day funds and instead put the money into SAFER.
The bill does not institute triggers or call for additional, automatic income tax cuts — but if legislators in coming years want to pursue more income tax cuts then they could draw from that savings.
“More money in the pockets of West Virginians is good. I don’t know how we can look at it in any other way,” said Delegate Marty Gearheart, R-Mercer. “I believe we have a good shot to take, and we have an opportunity to take it.”
Democrats expressed concern about whether the state can sustain even the first round of tax cuts.
The financial effect for the first year is estimated to be about $110 million — but the twist is it wouldn’t go into effect until halfway through the fiscal year. After that, the annual financial effect for the state is an estimated $264 million, although it would be even more if additional income tax cuts are approved.
The worry some delegates described is the ongoing costs of pay raises, a possible state Medicaid shortfall and more.
“There is a train coming straight at us of financial responsibility. It can run over us, or we can dodge us, but we’re going to have to deal with it,” said Delegate Larry Rowe, D-Kanawha.