Tax bracket differences emerge over governor’s proposal

Gov. Jim Justice is pushing for income tax cuts of about 10 percent for West Virginians. But the governor has been suggesting lower-income citizens should get a bigger break by percentage than higher wage earners.

House Finance Chairman Eric Householder agrees with the broad strokes of the income tax cut. However, Householder contends the 10 percent should apply to all brackets.

Details like those could make or break the tax proposal that the governor wants lawmakers to consider during a special session the final week of this month.

“I’m surely very hopeful that we’ll get total cooperation and we’ll get our income tax reduced because our people are hurting,” Justice said during a broad-ranging briefing. “And this is the fastest, easiest way to get money in their pockets. We’ve got to get this done. That’s all there is to it.”

Justice announced the income tax proposal just as the state concluded the fiscal year $1.3 billion ahead of anticipated general revenue. The details of the tax cut proposal are just broad strokes right now, but the governor wants to complete the legislation starting the week of July 24.

The governor’s proposal is a variation on the kind of income tax reduction that lawmakers have considered several times since he took office in 2017. Past versions fell apart over disagreements about their details, especially sales taxes that would have gone up to offset declining income taxes.

This version doesn’t have those kinds of offsetting tax increases, but there still could be differences between the governor and lawmakers.

One of the differences might be tax brackets.

“From the standpoint of the tiering, let’s just be fair again,” he said. “But I don’t see the fairness for us to go all the way down the scale to somebody that’s fighting every day and they’re making $18,000 and we throw them a teeny, teeny bone, and the folks that are doing a whole lot better could maybe not take such a big bone.

“So with all that being said, we’re going to try to make this equitable for all of our people and to try to help all the people that we possibly can.”

Eric Householder

Delegate Householder, the Finance chairman, said he is excited about the income tax cut. But there’s a distinction: Householder supports 10 percent cuts for each bracket.

“Any time you’re talking about a 10 percent permanent tax cut, it’s a win for the West Virginia taxpayer. Now my caution for the governor is, let’s do it equitable like we did in House Bill 4007. Let’s do across-the-board, 10 percent for each of the five income tax brackets,” said Householder, R-Berkeley.

He added, “We know inflation is happening regardless of your income level, so if you’re going to do it fairly then you need to do it against all five brackets.”

Householder said the same percentage cut across all brackets would be an easier pitch in the House of Delegates.

“All taxpayers right now are seeing higher gas prices, rising food prices, inflation, so this is a way to help all income levels. That’s the direction I hope the governor chooses, but we’ll have to wait and see what’s in the plan.”

There might be even bigger differences in how the Senate leadership views the governor’s proposal.

Senate President Craig Blair, R-Berkeley, has said he supports an income tax reduction, but he would like to move on property tax cuts first. But even within the Republican caucus there are differences. Senator Robert Karnes, a Republican who made a daily speech during the regular session in support of income tax cuts, said this week that he still holds that priority.

Justice cited political ambition as a reason for the differing positions.

“Are people moving around — and this is pretty common — are people moving around and trying to position themselves to say ‘I want to run for governor. I want to be whatever. I want to be at the next office. Whatever.’ You’ve got a lot, a lot, a lot of people that are running through this building thinking ‘Where can I go next?’

“We can say we can lower the tax on automobiles. We can do this. We can do that. All of us want to do all those things. But is there anything today that has the appeal that lowering your personal income tax has? There’s no way. And at the end of the day if they don’t want to do that, then that’s on them.”

Justice concluded, “I don’t do any more than say this is the move we ought to make. And if they don’t want to do it, well they don’t want to do it. But it’s a big time wrong move, and, I think, politically driven. But you don’t have that with me.”

Doug Skaff

House Minority Leader Doug Skaff, D-Kanawha, said it would be more effective for state officials to cooperate on comprehensive improvements to West Virginia’s tax code.

“It needs to be part of an overall strategy,” Skaff said. “It needs to be part of an overall strategy. We can’t just say ‘Hey look, we’ve got record surpluses here. Now let’s go and cut taxes across the board 10 percent.’ We need to really get focused and hone in on what taxes give the most relief to West Virginians.”

Kelly Allen

Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank, questioned the wisdom of the tax cut based on a year of exceeding budget expectations.

“It is fiscally irresponsible to enact a permanent tax cut based on a one-time revenue surplus, particularly an income tax cut that overwhelmingly benefits the wealthiest people in our state,” Allen said.

“Governor Justice’s own administration officials have spent this year urging caution given unpredictable economic factors impacting our revenues. If they have more certainty about our fiscal outlook now, they should produce an updated six year outlook and revise their revenue estimates.”

Instead, she said the money that has come in beyond what the state had anticipated should be used to shore up other needs.

“This surplus could address immediate one-time needs that would have far greater impact on working West Virginians than a tax cut primarily for the wealthy,” she said. “It could address PEIA’s solvency, close the looming Medicaid shortfall, and invest in pilot programs that have a real impact on workers and our economy like child care and paid leave.”

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