As a special session heads toward resumption, leading lawmakers remain unconvinced the state is in financial position to afford the additional 5% personal income tax cut advocated by Gov. Jim Justice.
“Not yet,” said Senate Finance Chairman Eric Tarr, R-Putnam.
Justice has been pushing for a 5% tax cut since early July. That would be on top of a 21.25% tax cut already instituted by the state, plus a 4% cut automatically triggered when the state hit particular economic conditions.
The Legislature gaveled in Monday for the start of the special session called by the governor, but adjourned until Sunday without taking up the tax cut bill. The resumption is rapidly approaching without most lawmakers signaling they’re ready to embrace the tax cut.
Lawmakers want to see figures for the state’s financial reserves as well as revenue projections for upcoming years. They also want to see plans to reduce the state’s liabilities, particularly for the Board of Risk and Insurance Management and unemployment.
Lawmakers have generally expressed caution about the governor’s 5% tax cut proposal because other tax cuts are still going into effect and because there are additional spending commitments also still going into effect — like the continued rollout of the Third Grade Success Act and estimated additional costs for more Hope Scholarship enrollment.
“We’ve also been watching really closely the revenues of the state. And this time last year, we were sitting at a $234 million — almost $235 million — surplus. And right now, we’re sitting at a $1.2 million surplus for the fiscal year,” Tarr said this week on MetroNews’ “Talkline.”
“So we’re trepidatious with it, I think, so that we’re taking some caution to make sure we do not fail the people of West Virginia in being able to pay this income tax out — because if you do it too aggressively, what happens is you have to go back and raise taxes for having done it too aggressively.”
Tarr said the Republican majority caucus still has time to explore details presented by the Justice administration. But he said those details are still needed.
“And so as we go through and have those discussions right now, where it’s at is we’re still looking at everything. The governor still has time between now and the end of this call that he’s done to present a plan that doesn’t have the growth in spending that’s ahead of us now already,” Tarr said.
“So those are where the discussions are at, so we’re kind of in a wait and see mode.”
But if it’s not clear there’s a support among a majority of members, “then there’s really no use to go up and move that bill forward. Otherwise, you’re wasting time and money that we’re paid to be up here. So I think it needs to be proven to the caucus that it’s a safe thing to do relative to the spends that are statutory. We have spends that are in law that we have to make that are significant growth over the next couple of years.”
Senate Majority Leader Tom Takubo also expressed caution.
“Well, we’re still in negotiation,” Takubo, R-Kanawha, said on “Talkline” and noting the other recent and significant tax cuts the state has instituted.
“I think everybody wants to get as close to zero as you can, but we want to do it responsibly and make sure that we can do that with all the other wants and needs that’s going on the state. And so we’re looking at all the different options.
The 5% tax cut amounts to about $110 million. Takubo said that money, if available, could be spent on other needs such as the expansion of broadband internet across West Virginia’s mountainous communities.
“I’m all about getting taxes. I mean, the legislature has cut about a little over a billion dollars in taxes since I’ve been in over the past 10 years, but you want to do it in a responsible, controlled way, and you certainly don’t want to hurt anybody in process,” Takubo said.
Justice, in an administration briefing this week, characterized the proposed cut as bringing financial relief to West Virginia taxpayers. He said the choice now belongs to lawmakers.
“If the legislators say to the voters who are hurting in regard to inflation ‘We don’t want to do a tax cut,’ I’m OK. I’m OK,” Justice said. “I’m just trying to do my job.”