MISSION ACCOMPLISHED — The balloons drop as Senate President Craig Blair, left, Gov. Jim Justice, center, and House Speaker Roger Hanshaw, right, presented the first signed copy of House Bill 2526, the compromise tax reform package. - Steven Allen Adams

CHARLESTON — Being called the largest tax cut in 37 years, Gov. Jim Justice signed a bill putting in place tax cuts and rebates for West Virginia citizens, veterans and small businesses.

Justice signed House Bill 2526 on Tuesday afternoon at the West Virginia Culture Center before a group of lawmakers from the House of Delegates and state Senate.

“Today, we put our stakes in the sand to invite any and every one to this great state, to bring their business opportunities to us, to bring their jobs to us, to bring their folks to us,” Justice said. “It is an absolute monumental day; a day that I have incredible pride in.”

HB 2526 is a compromise, with Justice and the House on one side and the Senate on the other side, combining part of the governor’s original proposal for a 50 percent cut in personal income tax rates over a three-year period with a 15 percent personal income tax cut originally proposed by the Senate.

The final bill includes a 21.25 percent cut across all six personal income tax brackets retroactive to Jan. 1 of the current tax year. The personal income tax cut would return approximately $590 million to taxpayers.

“It’s so much better in life and anything we do when we do it as a team, when absolutely everybody wins,” Justice said. “Whether it be the House, the Senate, the Governor’s Office, or all the great people of the State of West Virginia. When everybody is on the team and everybody wins, it’s a great, great day in this state.”

Speaking after the bill signing, Senate President Craig Blair and House Speaker Roger Hanshaw credited actions taken by the Legislature over the last eight years since the Republicans took the majority for making it possible to provide the tax cuts in HB 2526. These actions include more than four years of maintaining flat general revenue budgets and limiting new spending.

“This is a momentous occasion for the people of West Virginia,” said Blair, R-Berkeley. “We’ve been working together for years as a team, as the governor says.

“The work that we’re doing is making it so that it puts us in a position to do this,” Blair continued. “We know that we can do it, so we’re moving forward with being able to have job creation, having educational opportunities and have the things our people deserve. They’re finally getting them now and now we’re able to give back and put some money in their pockets on top of it.”

“This is a validation of the last eight years of work,” said Hanshaw, R-Clay. “What we’ve seen signed in House Bill 2526 here is only possible because of eight years of work and creating a new economy here. That’s why most of us are here and certainly why I’m here. We want to keep doing it.”

The bill includes a trigger formula for further reducing personal income tax rates after Aug. 1, 2024, by comparing general revenue collections in a previous fiscal year minus severance tax collections compared to the base year of fiscal year 2019 and tied to the non-seasonally adjusted consumer price index.

If the general revenue collections minus severance tax collections exceed the adjusted base year, a reduction would be triggered. Personal income tax rate reductions would be limited to no more than 10 percent during a fiscal year.

HB 2526 includes a 100 percent rebate on vehicle tangible personal property taxes for state residents. The rebate allows counties that rely on tangible personal property taxes to continue to collect those taxes. The rebate would come in the form of a refund on annual personal income tax filings. The rebate would return $130 million to taxpayers annually.

The bill provides a 50 percent tax rebate in the form of personal income and corporate net income taxes refunds for the payment by small businesses on tangible personal property taxes on machinery/equipment, inventory, leasehold investments, computer equipment and furniture and fixtures.

A small business in the bill is defined as one with personal property located in the state with an aggregate appraised value of $1 million or less. The bill’s provisions do not apply to anyone holding interests in oil, natural gas or natural gas liquids. The provisions would return approximately $35 million to taxpayers annually.

Lastly, HB 2526 includes a 100 percent refundable homestead tax credit for veterans who are 90 percent to 100 percent service-disabled. With all the provisions combined, the compromise bill would return approximately $750 million to taxpayers annually.

The tax reform plan has been a long time coming. In 2021, Justice proposed a plan to phase out the personal income tax. While the Senate at that time supported the plan, the House backed a different plan to phase out the tax. The bill died in the House on a 0-100 vote after both sides could not come to an agreement.

Last summer, Justice proposed a plan backed by the House earlier that year for a 10 percent cut to personal income taxes. The Senate rejected that plan, choosing to put its efforts into getting voters to approve Amendment 2, a constitutional amendment on the November ballot to give lawmakers authority to eliminate six categories of tangible personal property taxes. A Senate plan would have replaced the lost funding to counties and municipalities by funding them through the general revenue budget.

While allies in 2021, the difference in tax policy last summer created a rift between the governor and Senate, with Justice traveling the state to campaign against Amendment 2 and the Senate’s plans to eliminate tangible personal property taxes. Voters overwhelmingly rejected Amendment 2.

Justice came back in January with what he called the largest tax cut in state history. The original version of HB 2526 would have cut personal income tax rates by 30 percent retroactive to Jan. 1, then 10 percent in 2024 and another 10 percent by 2025. The bill also included a $700 million fund to ease the transition as the personal income tax rates dropped to 50 percent. Justice’s plan in the original version of HB 2526 would have returned more than $1.4 billion to taxpayers when fully implemented.

More than 42 percent of the state’s $5.9 billion in tax collections for the general revenue budget in fiscal year 2022 ending last June came from more than $2 billion in personal income tax collections.