Gov. Justice hosts 2nd town hall on tax reform
CHARLESTON — Gov. Jim Justice spent a second day selling his ideas to phase out the personal income tax, with bills expected to be introduced by the end of the week and as early as today.
“Probably (today) I’ll have it to the Legislature, and I hope that they concur and agree what we’ve put together is a really good plan,” Justice said. “At the same time, if they have ideas and tweaks or whatever that may make this thing better, I’m open. I’m always open to that.”
Justice held a virtual town hall Wednesday evening to talk about his personal income tax repeal proposal. He was joined by Dave Hardy, secretary of the Department of Revenue, and Deputy Secretary Mark Muchow.
Justice proposed cutting the five personal income tax rates by half and letting possible economic growth replace the revenue lost from those decreased tax rates. If approved by the Legislature, the personal income tax cut could come by Jan. 1, 2022.
“What’s the downside, West Virginia? If we all do this and come together … if we can do that and then we can let growth eradicate the rest of the income tax in the State of West Virginia, watch and see what happens. People will come far and wide to come here. When they come, they’ll bring their businesses, and they’ll bring goodness to West Virginia.”
Revenue from the personal income tax made up 43 percent of the state’s general revenue budget during the 2020 fiscal year, bringing in $1.9 billion due to moving the income tax filing deadline last year from April to July. During a normal fiscal year, the personal income tax brings in between $2 billion and $2.5 billion annually.
According to the Department of Revenue, the state’s highest tax rate of 6.5 percent on income more than $60,000 would decrease to 3.25 percent under the governor’s proposal. The lowest rate of 3 percent would be cut to 1.5 percent.
Justice first proposed lowering the personal income tax during his State of the State address to lawmakers on Feb. 10. To help ease the phase-out, Justice proposed a tiered severance tax for coal, oil, and natural gas. The tiered system would raise severance tax rates when coal and natural gas production is up and lower the rates when production decreases.
Justice also called for raising the consumer sales and use tax by between 1.5 percent and 1.9 percent, increasing taxes on tobacco and soda, removing tax exemptions for professional services, creating a wealth tax, and making $25 million in cuts in state government.
Since his State of the State address, Justice has offered few specifics and changed up some of the proposals.
The wealth tax is now a tax on luxury goods, though no specifics were offered for what would be taxed. The tax on soda could increase from 1 cent to 4 cents. Hardy said that tax increases on vape products could be coming, as well as increases in alcohol taxes.
Hardy said natural revenue growth projected at between $60 million and $80 million per year, combined with keeping state budget proposals flat for the next three years, cutting the budget by $25 million, and finding cost savings in eliminating state employee positions through attrition and retirement – a projected savings of $10 million annually – could help cover the lost revenue from cutting the personal income tax.
“Add all those savings up, and the people of West Virginia would receive much more in tax relief than they’re being asked to pay through any potential taxes,” Hardy said. “This is a net gain for the people of West Virginia.”
Democratic lawmakers in the House of Delegates and state Senate are opposed to Justice’s tax reform proposals. Justice acknowledged the concerns and even conceded that past efforts by legislative Republicans to bring businesses to West Virginia by eliminating prevailing wage and passing right-to-work legislation haven’t worked.
“Any time you have change for anything, it’s difficult,” Justice said. “The first reaction is ‘I don’t want to do that.’ But the reality of it is just this: no one can tell me how West Virginia is going to climb out of this and continue to grow. No one can tell me a road map.”
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