Tax reform efforts seem doomed to implode

We are less than two weeks away from the end of the 2020 legislative session at midnight April 10 and already there is talk of a special session in the air.

Gov. Jim Justice is furious that his bills are not moving in the House and Senate to cut the personal income tax rate by 60 percent and raise other taxes to compensate for the loss of revenue.

The House of Delegates is set to pass today its version of a multi-year personal income tax phase-out, House Bill 3300. The bill’s fate, once it gets to the Senate, is dubious at best. Republican leadership is supportive of Justice’s plan, warts and all, believing it’s the best way to show the nation West Virginia is serious about cutting personal income taxes. Any flaws can be dealt with later.

The House’s plan cuts personal income taxes by $150 million every year until the tax is eliminated. Unlike Justice’s plan, it doesn’t raise other taxes or eliminate tax exemptions. It also cuts the personal income taxes used by small businesses and sole proprietorships. Justice’s plan leaves those tax rates in place.

But the House plan could take anywhere between 2035 and 2045 to phase out the tax. The House plan also creates a special fund that skims off the top of other tax revenue streams and special revenue streams to create a cushion in case of economic downturns. When the fund reaches $400 million, $100 million of that gets transferred to the general revenue fund, helping speed up the tax cuts.

The one thing hurting the House plan with Republican lawmakers is how funds are skimmed from other revenue sources. A fiscal note from the West Virginia Lottery pointed out skimming from its various special revenue funds could hurt payments on bonds and reduce funding for the PROMISE Scholarship and senior programs.

House Republicans already had to deal with fallout at the beginning of session after a survey was leaked to a website asking how the caucus would feel about cutting certain programs, such as PROMISE. The Income Tax Reduction Fund would basically confirm the worst fears of opponents who don’t want to see PROMISE or other vital programs cut.

I also suspect the reason we have yet to vote on HB 3300 is because leadership is trying to whip votes. It was on third reading Friday, but action was postponed one day. While the Senate met Saturday to keep bills moving, the House adjourned until Monday, giving members the weekend to convince skeptical Republicans.


As a recent editorial in this space stated, it’s a battle of the tortoise and the hare. Justice’s plan is an instant 60 percent cut, but you’re going to have to pay more for goods and vices. The House plan takes its time, but supporters believe it provides more predictability and stability.

So, what will the Senate do with HB 3300? I don’t suspect they will pass it as it is written. My best bet is it guts the bill and inserts the Governor’s plan. That can be done through a committee substitute or a strike-and-insert amendment. It could get out of the Senate Finance Committee that way as Chairman Eric Tarr, R-Putnam, is a supporter of the Governor’s plan.

However, does the Senate Republican Caucus have the votes to move the Governor’s plan forward when it comes to a floor vote? My eight-ball is murky on that. I can confidently say, based on my conversations with House Republicans, there is no love for the Governor’s plan on that side.


Justice continued his town halls last week, taking them on the road to Morgantown, Beckley, and the Eastern Panhandle to gain support from the public for his plan. He has done interviews with national conservative writers and pundits. He even got his own group of business leaders together after the West Virginia Chamber of Commerce, the Business and Industry Council, the Farm Bureau and others came out against his plan.

Bill Cole, a successful businessman and former Republican Senate president, launched Opportunity Now West Virginia to promote the Governor’s plan. In an interview on MetroNews Talkline with Hoppy Kercheval Friday, Cole admitted that they’ve contracted with Mercury Public Affairs, a Washington, D.C., marketing firm that Senate Republicans have used several times, to get Justice on national media programs to promote the tax plan.

I don’t know if Justice got too accustomed to being on national media talking about our successful vaccine distribution, but in this instance he is pitching to the wrong audience. I know he talked to lawmakers (he met with Senate majority and minority leadership Friday), and he’s on the record saying he welcomes lawmakers tweaking his plan. But if that was true, why did House Republicans move their own bill instead of amending his?

Someone who knows Justice well explained to me that once Justice believes something, it’s hard to get him to change course. Justice believes his plan is the best and there is little lawmakers can do to tweak his plan without incurring his wrath. But many Republican lawmakers are not willing to go against the Chamber of Commerce or the Farm Bureau.

I don’t believe lawmakers do something or not do something because a lobbyist group instructs them one way or another, but certainly lawmakers like endorsements and most Republicans have a chamber, BIC or Farm Bureau endorsement. Is the Governor meeting with House Republicans? Is he meeting with the chamber and these other groups instead of denigrating them?

As of now, it sure seems like both the Governor’s and the House personal income tax plans are doomed to implode as we enter the final 13 days of the session. This has to get figured out before lawmakers can even pass a budget, since budgets are required to be balanced by law. It’s possible a budget might not get approved if Justice insists on a special session for tax reform.

As I said last week, it’s 2017 all over again, and this time we don’t even have a budget crisis or a $500 million hole to fill.

(Adams is the state government reporter for Ogden Newspapers. He can be contacted at sadams@newsandsentinel.com)


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