Gov. Jim Justice celebrated a $1.308 billion surplus beyond his own revenue estimate at the end of the fiscal year and then announced that his administration will pursue personal income tax cuts of about 10 percent.
“We have the money to do it,” the governor said in a livestreamed briefing today.
He said the proposal will be tiered “and we’ll try to make it as fair as we can possibly make it.” That would include significant breaks for those in higher brackets, the governor said, saying those are often entrepreneurs and employers. The break also would be retroactive to the start of the tax year starting this past January, he said.
“This would be a permanent reduction in the state personal income tax. We want to provide West Virginians with a permanent tax cut for permanent relief and not a temporary stimulus,” Justice said.
Justice said he would introduce the bill in a special legislative session later this month.
“I’m very, very hopeful that we will absolutely lay aside our differences and pass a bill that will put $250 million back into the hands of the people of West Virginia,” Justice said.
Justice did not allude to any discussions with legislative leaders prior to his announcement. The proposal came as a surprise to Senate President Craig Blair and Senate Finance Chairman Eric Tarr, according to Jacque Bland, that chamber’s communications director. “So, right now, they’re still working to digest and evaluate.”
Senate Minority Leader Stephen Baldwin, D-Greenbrier, said his caucus looks forward to learning more about the proposal.
“This 10 percent income tax reduction proposal merits discussion and research. Can we do this responsibly? Will it provide equitable tax relief or disproportionately benefit the rich?” Baldwin asked.
Some members of the Republican majority in the House of Delegates publicly praised the income tax proposal.
The @wvhouse proposed this in January with House bill 4007 so we are excited!!
— Amy Summers (@AmyMSummers) July 7, 2022
Thank you, @WVGovernor, for making this such a priority. With historic inflation, the rising cost of goods, and skyrocketing gas prices, West Virginia families deserve permanent relief! https://t.co/tuAOmfTTp2
— Larry Pack (@LarryPack) July 7, 2022
The governor and legislators have considered income tax cuts several times over the course of Justice’s time in office.
Most recently, during the regular session of 2021, the governor, the Senate and the House of Delegates spent weeks debating but couldn’t agree on the details of a framework. The governor’s proposal then had an offset of the income tax reduction through increases of other taxes, particularly sales taxes. Delegates ended discussions by voting down that proposal, 100-0.
“My proposal was really complicated,” the governor said today. “And it took a long time to get that proposal all ready. In fact, it was months in the making and it was difficult to explain, and we tried to compress it into a really short window.”
At the end of this past legislative session, the House of Delegates had a budget provision to set aside $265 million for a possible future income tax cut. But the governor exercised a line item veto. His objection was that a corresponding bill to establish a fund for that money had not passed.
Meanwhile, the state Senate has been holding off on income tax discussions recently, instead focusing on the possibility of cutting personal property taxes.
A property tax amendment on state ballots this fall could lead to an effect of more than $500 million, an association of county officials has concluded.
Any personal property tax cut would need to be approved by lawmakers. County government budgets rely on those property taxes, so lawmakers have been taking part in discussions about how to make up that money for services provided by counties.
So even with a big, one-year surplus there’s a big math question about whether state officials could pursue a $250 million income tax cut while also diverting up to $500 million to counties because of potential property tax cuts.
Baldwin questioned how state leaders intend to balance a significant income tax cut while also continuing consideration of major property tax cuts.
“Can we afford it if the machinery, inventory, equipment, & personal property tax amendments are passed by the voters in November?” Baldwin asked.
“We are mindful that our historic surplus this year is one-time money. Without a six-year outlook, we have great concern about ensuring that our police, schools, and first responders will be fully funded on the county level.”