Compromise Carries the Day on Tax Cuts

It is often said that politics is the art of compromise. It is rare when developing public policy that each side gets everything it wants.  Therefore, it is typically necessary to give a little to get something done, rather than remain unyielding and end up with nothing.

The West Virginia Legislature was heading dangerously close to the “do nothing” option on tax cuts. The House had passed Governor Justice’s plan to reduce taxes by 50 percent over three years, saving taxpayers more than $1 billon the first year.

The Senate countered with a reduction of 15 percent in rates, a rebate on the property tax on vehicles, a 50 percent rebate on the personal property taxes small businesses pay on machinery and inventory, elimination of the marriage penalty and a tax benefit for veterans. The savings to taxpayers would be about half of the Governor’s plan.

We heard for several weeks that the ongoing discussions were not producing much progress. The two sides were having trouble agreeing on the fundaments, such as how deeply the state could cut taxes without putting the state at financial risk.

However, the two sides never stopped talking, and this past weekend they reached an agreement.

The bill cuts income tax rates by 21.25 percent, rebates or credits the annual car tax, gives small businesses a 50 percent credit or rebate on their personal property taxes, and gives a tax credit to disabled veterans. The bill also includes a trigger mechanism so that in future years, when state revenues hit a certain benchmark, the income tax rates can be reduced by another ten percent.

It is estimated that taxpayers will save about $750 million a year. That is a substantial savings for taxpayers and a manageable amount for state government. The state is projected to have a $1.7 billion surplus this fiscal year, but it is unlikely those sizable surpluses will continue.

The plan cleared the Senate with only one “no” vote and now is under consideration in the House. Majority Leader Eric Householder spoke in favor of the plan during an appearance on “Talk of the Town” on WAJR Radio Monday. “I’m quite happy,” he said. “I’m going to celebrate a compromise anytime that we can offer tax relief.”

The House still must approve the bill, so hold off on the celebration until then, but credit Governor Justice and Senate and House negotiators for working through their differences and coming up with a reasonable accommodation.

For a while it appeared as though personality conflicts and entrenched positions would doom discussions. That would have been a major public policy and political failure that would have led to intra-party finger-pointing and reprisals, making future agreements even more difficult. But instead, West Virginia is on the verge of a historic tax cut, and that is the positive result of the art of compromise.

 

 





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