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Governor calls special session on income tax cuts, but outcome isn’t clear yet

Gov. Jim Justice issued a call for a legislative special session to begin at noon Monday, proposing cuts to personal income taxes.

The governor’s call also included more specific information about changes to brackets, reflecting the governor’s desire to give lower wage earners a somewhat larger break by percentage.

That kind of detail could determine how lawmakers react to the proposal. Republican lawmakers who otherwise support an income tax cut have been advocating for a 10 percent reduction across each bracket.

And Republican leaders in the state Senate have been focused on a different tax entirely, wanting to continue laying the groundwork for personal property tax cuts.

The total amount of the governor’s proposal is $254 million. The cuts would be retroactive to apply starting Jan. 1, 2022.

Justice today said he has long supported cutting personal income taxes.

“It will drive job growth, population growth, and prosperity in West Virginia. But the most important thing to do is get started right away,” Justice stated. “In the past year, gas prices have gotten out of control and inflation is through the roof. West Virginians need help right now.”

The governor’s proposed bracket changes include:

Dave Hardy

Revenue Secretary Dave Hardy went over the bracket proposals during an appearance on MetroNews’ “Talkline.”

“The governor spent a lot of time thinking about this and trying to determine what would be fair,” Hardy said. “You have West Virginians of all income levels who are feeling the price of inflation. So the lower income brackets, the percentage reduction is very high.”

Hardy said, “It offers everybody a tax cut.”

Stephen Baldwin

Democrats in the House and Senate said they will consider the tax cut proposal with open minds. Democrats called for sales tax cuts during the regular legislative session and then pushed for a gas tax holiday this past spring.

“West Virginians need help now,” said Senate Minority Leader Stephen Baldwin, D-Greenbrier. “As inflation has grown this year, Democrats have proposed ideas to provide the people with relief now–gas tax relief, sales tax relief, tax credits for families, workforce investments, and even a tax rebate. Those suggestions have largely been dismissed or ignored by the governor and the majority party.”

Doug Skaff

House Minority Leader Doug Skaff said he wished the governor would have looped in lawmakers earlier. And he expressed a desire for a broader examination of tax policy. But he said this proposal is a start.

“The governor announced this plan without discussion with or input from legislators — and we are the ones who have been hearing from people across the state on what would help them the most,” said Skaff, D-Kanawha.

“The limited special session call also precludes us from discussing other avenues for meaningful tax relief for West Virginians. His lack of communication aside, we look forward to reviewing this plan to see how we can provide much-needed relief to the citizens of our state.”

The governor’s announcement suggested this could be just the beginning on income tax cuts. He alluded to other states with no income tax to suggest tax cuts could drive growth in West Virginia.

“It’s a cycle of goodness producing goodness,” Justice said. “That’s what I want in West Virginia, and I hope that the Legislature will agree with me and pass this bill.”

Jared Walczak

Jared Walczak, vice president of state projects for the national Tax Foundation, generally agreed with the governor on that point.

“Policymakers across the country are responding to significant revenue growth, worsening inflation, and an increasingly mobile economy that increases the importance of a competitive tax code,” Walczak said today. “West Virginia can be an attractive location for remote workers, and income tax reductions can help seal the deal for some prospective taxpayers.”

Yet Walczak also took note of the proposal favored by state Senate leaders to move toward personal property tax cuts.

‘At the same time, however, there is also a measure on the ballot this year to allow the legislature to reform the state’s onerous taxes on business tangible property, which impede investment in the state,” he said. “Income tax rate cuts are good in their own right, but policymakers shouldn’t lose sight of the goal of reforming a tax that holds back much-needed business investment in West Virginia.”

Jason Huffman

West Virginians coping with high inflation need a tax break right away, said Jason Huffman, state director of Americans for Prosperity-West Virginia.

“Governor Justice is absolutely right to pursue taking a first step towards permanent relief for every hardworking Mountaineer. Legislative leaders have continued to make government live within its means and break down the barriers to opportunity holding us back. Through growth and fiscal restraint, state government’s coffers are flush,” Huffman said.

“So, it’s high time policymakers take the next step on the pathway to prosperity through investing in West Virginia’s future by putting more money back into the pockets of the people — helping folks better live out their version of the American Dream.”

Justice cited West Virginia’s budget performance this past fiscal year in advocating for the tax cut. The state’s general revenue came in $1.3 billion ahead of estimates. Hundreds of millions of that resulted from higher energy costs that brought in increased severance taxes on coal, oil and natural gas production.

The administration has said several times that it was careful to avoid crossing a federal rule against using pandemic relief either directly or indirectly as cushion for tax cuts. But the extent of the economic effects from that federal relief remains an issue for those assessing whether the state’s financial performance is a trend or a blip.

Kelly Allen

“There is simply no way for lawmakers to responsibly enact a permanent tax cut with a one-time revenue surplus largely due to federal aid, particularly given the administration’s failure to provide an updated six-year plan to give us a better picture of our future budget needs,” said Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank.

The special session on the governor’s tax proposal has also come while lawmakers are considering West Virginia’s abortion policy following the U.S. Supreme Court’s ruling to roll back Roe vs. Wade-era federal abortion protections. There is no timeline yet for the Legislature to consider abortion regulations.

Pat McGeehan

Delegate Pat McGeehan, R-Hancock, said this week that abortion policy should be the priority over tax cuts.

“We cannot allow our selves to be districted by other issues of materialism that by nature pale in comparison next to the priority of protecting human life,” McGeehan said.

This is a developing story and will be updated.

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