Day 60 of the 2019 regular session of the Legislature became tax cut day in the House of Delegates on Saturday, as the House passed and sent to the governor three tax cut/tax rebate bills in a matter of hours, providing tax relief to coal companies and senior citizens.
Debate over legislation to exempt Social Security retirement income from state personal income taxes was long and heated, after the Senate amended the bill to cap the exemption at $50,000 of gross income for single filers and $100,000 for couples filing joint returns.
That was to address concerns that House Bill 2001 otherwise would mainly benefit high-income retirees, while cutting the amount of tax revenue the state will lose when the cut is fully implemented from $50 million a year to about $25 million.
Many delegates saw the Senate amendment as breaking a key promise delegates made to constituents, and caving in to the Senate on the House’s keynote issue of the session.
“The House’s position was to eliminate this tax on senior citizens, not to cap it,” Delegate Isaac Sponaugle, D-Pendleton, complained. “This tax should be eliminated in its entirety.”
In a rare instance, Delegate Dianna Graves, R-Kanawha, agreed with Sponaugle, although for different reasons.
“We’re going to discriminate against those who’ve worked hard all their lives with this arbitrary threshold,” she said of the Senate cap.
In his fiscal note for the bill, Deputy Revenue Secretary Mark Muchow said the gross income caps could raise potential Constitutional issues under the equal protection clause, since some taxpayers could arbitrarily be denied the exemption simply by having incomes that slightly exceed the maximums.
However, Delegate Geoff Foster, R-Putnam, took a different perspective, noting, “I think it’s strange to hear people arguing for tax cuts for the wealthy.”
Delegate Cody Thompson, D-Randolph, countered that many retirees are raising grandchildren as a result of the opioid crisis, and others are supporting adult children because of the weak economy in many parts of the state.
Several delegates argued that the House should refuse to accept the Senate caps, and send the bill to a House-Senate conference committee to work on a compromise — a maneuver others warned could risk losing the bill entirely in the final hours of the regular session Saturday.
“What some of our colleagues are suggesting is a pretty high-stakes game of chicken that could leave our seniors without tax relief,” said Delegate Paul Espinosa, R-Jefferson.
Other delegates objected to another Senate provision that phases in the tax exemption over three years, at 35 percent, 65 percent, then 100 percent rates, noting that the first year provides state seniors with only about $2 million of tax relief.
However, House Finance Chairman Eric Householder, R-Berkeley, said that number could not be changed, since it is already built into the 2019-20 budget bill that the Legislature passed and sent to the governor on Friday HB 2020.
“Gov. Justice would either have to veto the budget bill or line-item veto items out to balance the budget,” he said of any attempt to change the phase-in rates.
Delegate John Doyle, D-Jefferson, said the recent trend of passing the budget bill before the end of the session hamstrings the Legislature from enacting meaningful legislation in the final hours of the session.
“It’s all because we’re in such an all-fired hurry to get the budget passed before the end of the session,” he said.
Ultimately, the House concurred on the Senate amendments on a 52-44 vote, then passed the bill 97-0, sending it to the governor.
The compromise bill was endorsed by AARP West Virginia, which has noted that West Virginia currently is one of only three states that fully tax Social Security retirement benefits.
Debate was more brief and more subdued over bills to give larger tax cuts and tax rebates to the coal industry.
Legislation to phase down the severance tax on steam coal used in coal-fired power plants from 5 percent to 3 percent over three years passed the House 82-17 (HB 3142). It will reduce state tax revenue by about $20 million in the first year and about $60 million a year when fully implemented.
“We’re spending $60 million a year to create very few jobs,” Delegate Evan Hansen, D-Monongalia, complained, referring to statements from economists that the tax cut, at best, will only slow an ongoing decline in steam coal production and employment as electric utilities continue to convert to cheaper, cleaner forms of energy, including natural gas.
“You may see mining employment decline at a slightly slower pace than it’s currently declining,” Muchow testified in Senate Finance Committee.
The House also passed 84-13 and sent to the governor legislation to provide 35-percent tax rebates for coal companies that invest in machinery or equipment to open or expand mining operations (HB 3144).
Although the bill’s fiscal note does not estimate a cost for the program, Sponaugle noted that the recent announcement by Arch Coal that it plans to invest about $360 million to open a new mining operation in Barbour County would make it eligible for more than $100 million of tax rebates under the legislation.
He also noted the discrepancy between the size of the first-year tax cuts for senior citizens and for the coal industry.
“So our budget only anticipates giving a tax cut of $2 million to seniors, but $20 million to coal companies,” he said.