Governor, Legislature divided on spending

MORGANTOWN — Nearly two weeks after West Virginia’s Democratic governor vetoed the budget approved by the Republican-controlled Legislature, negotiations have yet to resolve disagreements on tax changes and spending cuts.

However, Gov. Jim Justice said Tuesday that he’ll call legislators back to a special budget session “real soon.”

He didn’t say exactly when that will be but said he hopes the framework of a tentative agreement reached earlier with the Senate leadership will still hold.

That would limit funding cuts and lower the state income tax while raising the sales tax to close a budget deficit projected at up to $500 million. The new fiscal year starts July 1.

“What we’ve got it’s an unbelievable plan … a plan to take us to prosperity,” Justice said. “And not only that, you will wake into a 20 percent or maybe even a 40 percent reduction in your state income tax.”

That framework would limit cuts to public schools, higher education, social services and Medicaid. It would raise the state sales tax from 6 percent to 7 percent, add a corporate revenues tax of 0.00045 percent and in 2018, lower income taxes.

“This is a tax cut for every working West Virginian,” said Senate President Mitch Carmichael, who has been in active talks this week with the governor. Carmichael said he has been meeting separately with the House leadership, that they’d need to be brought onboard, and like them, he opposes the proposed corporate tax.

“The Senate has been very focused from the beginning on tax reform,” Carmichael said. “We believe that is one of the primary issues that impedes the growth of the West Virginia economy. And the best way to reform our taxes is to get rid of the personal income tax. … It’s been proven too often in other states to work.”

A Senate-passed bill would cut the top income tax rate from 6.5 to 5.45 percent. The lowest rate would drop from 3 percent to 1.85 percent.

House Speaker Tim Armstead said Tuesday his chamber’s Republican majority still strongly opposes the framework’s tax increases.

“Many members — particularly those from border counties — have serious concerns about raising the sales tax to 7 percent,” Armstead said. “Others are philosophically opposed to the commercial activities tax.”

Armstead said that after an initial meeting with Justice’s chief of staff last week, he received a call saying the governor wanted to meet with just the Senate leadership.

A House-passed bill would apply the state’s 6 percent sales tax to cellphone services, barbering and contractors, and start cutting the overall rate in the middle of next year, initially to 5.5 cents on the dollar.

“Speaker Armstead and I are honestly like on different planets,” Justice said. “And I believe he’s on a different planet from his own membership.”

A major Justice initiative is road and bridge reconstruction, which he says would create thousands of jobs. The House and Senate approved having the voters decide this year how to pay for it through a referendum on a $1.6 billion bond issue.

The governor says that can be matched with equal federal funds. He said Tuesday the referendum will be held sometime in August.

He proposed seeding the bonds with a 4.5 cents-a-gallon increase in the gasoline tax, which the Senate approved but the House didn’t. Carmichael called it a user fee for those who use the roads.