Republican Governor Jim Justice and the Republican super majorities in the Senate and House of Delegates want to cut taxes. They have been talking about it for months. However, they have yet to agree on how to do it.
The latest tax cut plan comes from Justice. He proposed this week reducing the state income tax brackets by an average of ten percent, with the deepest cuts coming at the lower and middle income levels. (Justice said on Talkline Thursday he had not worked out the specifics.)
Justice said West Virginians are being hurt by inflation, creating a sense of urgency to provide tax relief. “We’ve got to do something now,” he said on Talkline Thursday, adding that he planned to call lawmakers into special session later this month to consider the tax cuts.
Notably, Justice did not run his tax plan by Senate President Craig Blair or House Speaker Roger Hanshaw prior to making his announcement. They learned about it from the media, adding to the often unsettled relationship Justice has with the Legislature.
So, what will happen to the proposal?
The tax reduction should be a slam dunk in the House. House Finance Committee Chairman Eric Householder (R-Berkeley) proposed a nearly identical personal income tax reduction bill (HB 4007) during the legislative session earlier this year. It passed 76-20 with 4 absent. There is no reason to think the outcome would be significantly different with the Governor’s plan.
The Senate is more of a wildcard.
Most Senate Republicans favor a plan to cut personal property taxes. Voters will decide in November whether to amend the state Constitution to allow the legislature to make changes in property taxes.
Senate President Craig Blair (R-Berkeley) is a leading advocate for using that authority to eliminate two wildly unpopular taxes—the property taxes businesses pay on equipment and inventory, and the annual property taxes West Virginians pay on their vehicles.
Blair said on Talkline Thursday that he had not yet polled his caucus on the Governor’s plan, but he does know most of his members support the property tax break because of the potential economic impact.
“It’s significant. It applies to all West Virginians, and a 10 or 20 percent reduction in the personal income tax doesn’t produce any economic growth or any economic opportunities to grow the state, to grow the fiscal pie,” he said.
Blair suggested the Governor’s income tax reduction may have to be linked to the property tax cut to ensure support from a majority of Senate Republicans. “What I don’t support is doing it (income tax reduction) before we do the personal property tax,” he said.
Justice and Republicans are in a unique and enviable position; tax collections for the just-ended fiscal year came in $1.3 billion ahead of estimates. About $800 million of that is already committed, but that still leaves a $500 million surplus.
When the government collects more than it spends, it is prudent that taxpayers get something back or see their future tax liability reduced. It is time for Justice and the Republican leaders to finally agree on the best way to do that.