Governor Justice and the Republicans have been talking about cutting taxes for several years now. For a variety of reasons, they could never get a bill across the finish line. That failure became increasingly stark as the annual budget surpluses grew.
The expected record surplus of as much as $1.7 billion this fiscal year raised the pressure even more on Justice and lawmakers to return at least some of the overage to taxpayers.
Justice began the legislative session in January with an aggressive plan to cut income tax rates in half over three years, returning over $1 billion to taxpayers in the first full year. The House of Delegates quickly passed the plan with only two “no” votes.
The Senate took its time.
Senate President Craig Blair and Finance Committee Chairman Eric Tarr believed Justice’s plan cut too deep and would put the state in fiscal peril. They eventually approved a more modest plan with a much lower income tax reduction—15 percent—along with rebates for the vehicle tax, rebates of 50 percent on the machinery and inventory tax small businesses pay, elimination of the marriage penalty and a rebate on property taxes for disabled veterans.
Now, Justice has been known to go on the offensive against those who disagree with him. He must have been tempted, because Tarr had said repeatedly that legislators should get a tax deal without the Governor.
But Justice kept his cool and instead settled into negotiations with legislative leaders. The frequent discussions led to a deal:
A 21.25 percent reduction in the personal income tax rates, a full rebate on the car tax, the 50 percent rebate for small businesses on their machinery and inventory tax and a tax credit for disabled veterans on their personal income taxes on a homestead. The compromise also included a mechanism to reduce income tax rates further if future revenue collections reach certain benchmarks.
The Senate and the House approved the bill, and Tuesday, Justice, flanked by about 50 legislators, signed the bill into law, marking the largest tax cut in the state’s history. “It’s an absolutely monumental day,” he said, as gold and blue balloons dropped in celebration of the event.
Justice also had effusive praise for legislators. “It’s so much better when we do it as a team,” he said. “We don’t get it across the finish line without a team.”
The tax cut is retroactive to January 1st. It will save taxpayers about $700 million the first full year. According to the Tax Foundation, West Virginia becomes the 22nd state since 2021 to cut income taxes.
The cuts Justice and lawmakers ultimately agreed to are reasonable. They did not go crazy like the failed experiment in Kansas, nor use all the surplus on base-building spending, and adding the trigger for possible future rate cuts means income taxes will be reduced further only if the state can afford it.
The state’s growing economy and the historic surpluses made this a unique opportunity to ease the tax burden on West Virginians. Governor Justice and the Legislature have finally made good on their promises.