On the seventh day of the special session on the state’s 2017-18 spending plan, the West Virginia House of Delegates overwhelmingly passed its version of a revenue bill Friday. The plan would raise slightly more than $100 million in new tax revenue — or less than half the $224 million sought by Gov. Jim Justice to balance the budget.
Proponents of the legislation (House Bill 107) described it as not so much the final answer to the state’s budget shortfall but a starting point to break the budget impasse and reopen negotiations with the Senate and the Governor’s Office.
“We want to work with the governor and we want to work with the Senate,” House Speaker Tim Armstead, R-Kanawha, said after the 74-17 passage vote Friday afternoon.
“We have now had the House Republicans and House Democrats, and Senate Democrats, that have sent this message,” Armstead said, referring to the House plan’s rebuke of a Senate/Justice compromise that relied on a nearly 1 percent increase in sales taxes, but ultimately would have cut income tax rates by 20 percent, creating a $380 million hole in future state budgets.
The House proposal would primarily raise tax revenue by eliminating several sales tax exemptions in existing law, the largest being an exemption for telecommunications services — largely cellphone plans — that would raise about $60 million a year.
Proponents of the House plan call it “broadening the base,” as opposed to the Senate plan to increase the state sales tax from 6 percent to 6.95 percent, in the latest version.
While the proposed income tax cuts made the tax increases palatable to Senate Republicans (Senate Democrats unanimously voted against the plan Tuesday, a rejection that Justice called “despicable” and “terribly disappointing”), the House plan sweetens the deal by eventually making Social Security benefits and military pensions exempt from state income taxes. It also raises the personal income tax exemption from $2,000 to $2,500, for those with incomes under $100,000.
Delegate Isaac Sponaugle, D-Pendleton, said the House proposal would give tax breaks to the people who need them, not to “millionaires and billionaires.”
“We’re going to take care of people making less than $100,000, the people who are struggling,” he said, foreshadowing bipartisan support for the bill, with Delegate Stephen Baldwin, D-Greenbrier, being the lone Democrat to vote against it.
“This is progress. This is momentum. This is a simplified approach to solve our problem,” House Majority Leader Daryl Cowles, R-Morgan, said of the proposal.
The bill goes to the Senate, which did not meet Friday, except for a two-member quorum call.
While the House plan is more than $120 million short of the revenue increase Justice has said is needed to avoid “devastating cuts” to state programs and services, Armstead said he is hopeful an upturn in the state economy will close much of that gap. He noted the Senate/Justice revenue plan banks on about $94 million in new revenue in the 2017-18 budget year from growth in the economy.
Armstead said he would like to see the House and Senate leadership come up with a compromise through informal negotiations, but conceded Friday that the bill likely would end up in a House-Senate conference committee that will try to come up with an agreement while the rest of the Legislature would be sent home.
“I would love nothing more than to get back early next week with something we can take back to the House and Senate,” he said.
During Friday’s floor session, delegates rejected a number of amendments to the bill, including two that would have raised caps for tax credits for restoration of historic buildings.
The bill would raise the credit from 10 percent to 25 percent of costs, but caps the credit at $3.75 million per project, and sets an annual statewide cap of $20 million in tax credits.
House Finance Chairman Eric Nelson, R-Kanawha, argued it is prudent to maintain the caps, noting that a recent tax credit on purchases of alternative-fuel vehicles ended up costing the state more than $100 million.
Delegates did adopt an amendment exempting from proposed sales taxes contracting work for damage caused by declared natural disasters.
The House recessed until Tuesday, while the Senate is scheduled to reconvene at 11 a.m. Monday, after having not met for the past two days.
Each day in special session costs about $35,000 in pay and expenses for members, but the past two days will be lower, since most of the Senate was not in attendance.
Reach Phil Kabler at email@example.com, 304-348-1220 or follow @PhilKabler on Twitter.