State senators worked into the late evening Wednesday taking up pending amendments and expected passage of the Senate version of the budget bill, as well as the latest incarnation of a bill to cut the state personal income tax.
A pending amendment to the Senate version of the budget bill would nearly restore major budget cuts to West Virginia University, Marshall University and the Educational Broadcasting Authority, which operates West Virginia Public Broadcasting.
The Senate version of the 2021-22 budget plan had cut WVU’s general revenue appropriation by $12 million, Marshall’s appropriation by $6 million, and had zeroed out funding for Public Broadcasting.
As drafted, the pending amendment would fund WVU at $95.56 million, about $1.5 million less than the $97.02 million appropriation in the governor’s proposed budget.
Marshall would receive $46.06 million, about $700,000 less than the $46.76 million recommended in the governor’s spending plan.
The amendment would restore $3.77 million of EBA funding, about $60,000 less than the governor’s plan, but vastly better than no funding.
The funding levels in the amendment appear consistent with a requirement in the Senate version of the budget that virtually all state agencies and offices cut spending by 1.5% in the coming budget year.
Initially, the Senate budget plan had cut nearly $80 million of spending from Gov. Jim Justice’s $4.569 billion 2021-22 budget, which itself had cut spending by nearly $4 million from the current 2020-21 budget.
Senators were also expected to take up a new amendment to the proposed income tax cut plan.
As drafted, the amendment would reduce the Senate’s original proposal for an 8.5% state sales tax to 8%. The 8% tax would also apply to soft drinks and the sale of prepared foods.
It retains elimination of exemptions for a variety of professional services, including exemptions for broadcasting, print and outdoor advertising.
The amendment provides about $40 million of rebates for persons making $35,000 a year and less, to offset what otherwise would be higher tax burdens for those individuals with the shift of taxes from income taxes to higher sales taxes.
At a summit with legislators Monday, Justice said he insisted on the tax credits to assure his tax plan will not hurt West Virginians financially.
“I tried to make every single breathing West Virginian cash positive,” he said.
It also includes a tiered severance tax plan sought by Justice that increases tax rates on coal, oil and natural gas as market prices increase.
The amendment significantly modifies the income tax phase-out, creating a Personal Income Tax Reduction Fund, funded with budget surplus funds, excess Rainy Day funds and other appropriations. According to the amendment, each $50 million in that fund would correspond with a roughly 1.25% reduction in income tax rates.
The first year reduction in income taxes would be about $118 million, according to Senate Finance Chairman Eric Tarr, R-Putnam.
That’s a far slower phase-out than the $1.08 billion first-year cut in the $2.1 billion in annual personal income tax collections.
The West Virginia House Judiciary Committee passed a version of a bill to license syringe exchange programs that they hope will balance concerns on both sides of the debate after it was read for the first time Wednesday.
Health leaders have said Senate Bill 334, particularly as it left the Senate, would shutter syringe exchange programs in the state due to the restrictions it contains.
The House Judiciary Committee’s strike and insert amendment maintains the licensing program. Syringe exchanges would have to be part of a larger harm reduction program, and offer things like referrals to substance use disorder treatment, HIV testing and birth control.
Programs will not need to have support from a county commission or city council, law enforcement or the community. The public comment period before starting a new program was removed.
Programs will still need to operate toward an exchange rate goal of 1:1, and syringes must be “unique” to the syringe exchange program. A licensed health care professional must work with the program and offer services. An ID requirement has been removed, but syringes still can only be given to the individual — you can’t pick up syringes for a friend.
Programs will have to report data to the state annually.
An immunity provision added by the House health committee remains, providing protections to those operating syringe exchanges. The state may fine programs up to $10,000 for operating outside the law.
The committee accepted an amendment to prohibit state dollars from funding syringe exchanges, although existing programs do not bill Medicaid for syringe services since they are so inexpensive to fund.
“We just spent a good amount of time on amendment that has no real effect at all because we don’t even know how the programs work,” said Delegate Mike Pushkin, D-Kanawha. “We just want to make sure our tax dollars don’t pay for them and they’re not. Because of that, even though I appreciate the work done on this and the balance that’s been struck, I don’t want a vehicle back to the Senate.
“I think this would be better taken care of in the local communities and I don’t think the state should be dictating something like this because we have a whole bunch of people who feel strongly about something but they haven’t take the time to learn about it.”
The goal of harm reduction programs and syringe exchanges is to prevent the spread of disease through drug use. The U.S. Centers for Disease Control and Prevention recommends harm reduction and syringe exchanges operate with as little restriction as possible.
Part of that recommendation comes from researching the 2018 Cabell County outbreak of HIV, which was caused, in part, because of restrictions placed on the Cabell-Huntington Health Department syringe exchange. Those restrictions included a 1:1 exchange rate and requiring a Cabell County ID.
Dr. Michael Kilkenny, health officer of the Cabell-Huntington Health Department, said after the Senate passed the bill that the health department could not operate an exchange under the law because of the criminal penalties and tracking requirement, but mainly because it is a model proven not to work.
The bill will be on second reading Thursday. Bills on second reading have the right to be amended.
President Joe Biden drew a red line on his $2.3 trillion infrastructure plan Wednesday, saying he is open to compromise on how to pay for the package but inaction is unacceptable.
The president turned fiery in an afternoon speech, saying that the United States is failing to build, invest and research for the future and adding that failure to do so amounts to giving up on “leading the world.”
“Compromise is inevitable,” Biden said. “We’ll be open to good ideas in good faith negotiations. But here’s what we won’t be open to: We will not be open to doing nothing. Inaction, simply, is not an option.”
Biden challenged the idea that low tax rates would do more for growth than investing in care workers, roads, bridges, clean water, broadband, school buildings, the power grid, electric vehicles and veterans hospitals.
The president has taken heat from Republican lawmakers and business groups for proposing that corporate tax increases should finance an infrastructure package that goes far beyond the traditional focus on roads and bridges.
“What the president proposed this week is not an infrastructure bill,” Sen. Roger Wicker, R-Miss., said on NBC’s “Meet the Press,” one of many quotes that Republican congressional aides emailed to reporters before Biden’s speech. “It’s a huge tax increase, for one thing. And it’s a tax increase on small businesses, on job creators in the United States of America.”
Biden last week proposed funding his $2.3 trillion infrastructure plan largely through an increase in the corporate tax rate to 28% and an expanded global minimum tax set at 21%.
But he said Wednesday he was willing to accept a rate below 28% so long as the projects are financed and taxes are not increased on people making less than $400,000.
“I’m willing to listen to that,” Biden said. “But we gotta pay for this. We gotta pay for this. There’s many other ways we can do it. But I am willing to negotiate. I’ve come forward with the best, most rational way, in my view the fairest way, to pay for it, but there are many other ways as well. And I’m open.”
He stressed that he had been open to compromise on his $1.9 trillion coronavirus relief plan, but Republicans never budged beyond their $600 billion counteroffer.
“If they’d come forward with a plan that did the bulk of it and it was $1.3 billion or four ... that allowed me to have pieces of all that was in there, I would have been prepared to compromise,” Biden said. “But they didn’t. They didn’t move an inch. Not an inch.”
The president added that America’s position in the world was incumbent on taking aggressive action on modern infrastructure that serves a computerized age. Otherwise, the county would lose out to China in what he believes is a fundamental test of democracy.
Republican lawmakers counter that higher taxes would make the country less competitive globally.
“You think China is waiting around to invest in this digital infrastructure or on research and development? I promise you. They are not waiting. But they’re counting on American democracy, to be too slow, too limited and too divided to keep pace.”
His administration on Wednesday was pressing the case for tax increases. Treasury Secretary Janet Yellen said it was “self-defeating” for then-President Donald Trump to assume that cutting the corporate tax rate to 21% from 35% in 2017 would make the economy more competitive and unleash growth. Yellen said that competing on tax rates came at the expense of investing in workers.
“Tax reform is not a zero-sum game,” she told reporters on a call. “Win-win is an overused phrase, but we have a win-win in front of us now.”
Yellen said the tax increases would produce roughly $2.5 trillion in revenues over 15 years, enough to cover the eight years’ worth of infrastructure investments being proposed.
The roughly $200 billion gap between how much the taxes would raise and how much the administration wants to spend suggests there is space to address critics, such as West Virginia Sen. Joe Manchin, a key Democratic vote, who would prefer a 25% rate.
Commerce Secretary Gina Raimondo said businesses and lawmakers should come to the bargaining table, noting that there could be room to negotiate on the rate and timeline.
“There is room for compromise,” Raimondo said at a White House briefing. “What we cannot do, and what I am imploring the business community not to do, is to say, ‘We don’t like 28. We’re walking away. We’re not discussing.’”
Key to the Biden administration’s pitch is bringing corporate tax revenues closer to their historic levels, rather than raising them to new highs that could make U.S. businesses less competitive globally.
Trump’s 2017 tax cuts halved corporate tax revenues to 1% of gross domestic product, which is a measure of the total income in the economy. Revenues had previously equaled 2% of GDP. That higher figure is still below the 3% average of peer nations in the Organization for Economic Co-operation and Development, the Treasury Department said in its summary of the plan.
Still, some say the administration’s claim is misleading.
“The administration should use statistics that directly measure the burden on the corporate sector,” said Kyle Pomerleau, a fellow at the conservative American Enterprise Institute. “In fact, many measures of effective tax rates show that the U.S.’s burden is pretty close to middle of the road. Biden’s plan would certainly push up to the high end among our major trading partners.”
Business groups such as the U.S. Chamber of Commerce and the Business Roundtable argue that higher taxes would hurt U.S. companies operating worldwide and the wider economy.
The Penn-Wharton Budget Model issued a report Wednesday saying the combined spending and taxes would cause government debt to rise by 2031 and then decrease by 2050. But following the plan, GDP would be lower by 0.8% in 2050.
The West Virginia Senate Finance Committee has advanced a bill to the full Senate that would change the methodology for valuing producing oil and natural gas wells, approving changes that the Judiciary Committee made to the bill allow more latitude for the state Tax Department to reform how it values wells despite objections from the oil and gas industry.
County school boards and commissions across the state would have absorbed most of a projected revenue loss of $9 million stemming from additional expenses allowed by House Bill 2581 if it was enacted as passed by the House of Delegates, according to the Tax Department.
But the Judiciary Committee removed language from the original version of the bill providing for a tax on net profit by defining net proceeds for oil and natural gas as actual gross receipts based on sales volume minus royalties and operating costs and including lease-operating, lifting, compression, processing and transportation expenses as annual operating costs.
An impetus for the bill was a 2019 state Supreme Court of Appeals ruling in which the court held in part that the Tax Department improperly imposed a cap on gas well operating expense deductions.
Leroy Barker, director of the Property Tax Division of the Tax Department, said under questioning from Sen. Eric Nelson, R-Kanawha, that counties could be found liable through litigation if the Legislature doesn’t better define its taxation rules.
The latest version of the bill would still allow taxpayers who disagree with their property tax assessments to bypass county boards of equalization and review and go directly to the Office of Tax Appeals, lower the standard of proof that a taxpayer has to meet to get their property reevaluated from clear and convincing to a preponderance of the evidence and eliminate boards of assessment appeals.
The bill would apply to assessment years starting July 1, 2022 and become effective 90 days after passage.
Acting State Tax Commissioner Matt Irby told the judiciary panel that the department saw the original version of the bill as deeply flawed and as allowing taxpayers to essentially claim double credit for their expenses.
House Delegate Dianna Graves, R-Kanawha, the bill’s lead sponsor, and oil and gas industry representatives criticized the Judiciary Committee’s changes to the bill directing the Tax Department to propose rules for approval by a legislative rule-making review committee. Graves argued that the projected $9 million hit to local governments should be weighed against the tens of millions of dollars that counties will keep pulling in from oil and gas property taxes. Graves contended that now would be a convenient time to enact the bill as originally designed given the extra cushion that counties have from CARES Act coronavirus relief funding.
There are no estimates for what the current version of the bill would cost local governments. That figure would depend on the Tax Department’s own rule-making, although the burden on local governments is expected to be less.