With five days left in the 2021 regular session, Gov. Jim Justice unveiled Monday what he called a gentler version of his plan to sharply cut state personal income taxes, making up some of the revenue loss with a variety of tax hikes, including on sales taxes.
“I have given you a pathway that’s so gentle, and it helps every single person,” Justice said, unveiling the new plan, which he called “Justice 4 All,” at a summit of legislative leaders at the Culture Center Monday afternoon.
Justice called the session in hopes of reaching agreement between his plan, a Senate plan that cuts income taxes even more rapidly with steeper tax hikes to recoup some of the loss, and a House plan to more slowly phase in cuts.
“I’m begging you, talk to me, work with me, and somehow, someway don’t let this opportunity pass by,” Justice said.
The plan drew a muted response from House and Senate leaders, prompting Justice to say he will go on a statewide “road show” to educate voters about his plan if the session ends without passage of a tax cut bill.
House Speaker Roger Hanshaw, R-Clay, said Monday the income tax cut plan has to go forward, but suggested it may take some time.
“This has got to be part of our strategy to get people to move to West Virginia. It’s got to be done,” he said. “Between these three plans, there is a plan to get things done.”
Justice’s 11th-hour plan calls for a first-year income tax cut of 50% instead of the original 60%, an overall reduction totaling about $1.5 billion instead of $1.7 billion. It also rolls back proposed tax hikes to make up some lost revenue from $902.6 million to $812 million a year.
The new plan would still raise the state sales tax rate from 6% to 7.9%, and would expand sales taxes to a variety of professional services that are currently exempt, but also lowers a proposed increase in soft drink taxes from 6% to 3.4%, and eliminates proposed tax hikes on beer, wine and liquor.
The plan also maintains a $1.05 a pack increase on cigarette taxes, but lowers taxes on e-cigarettes.
Justice said the new proposal retains — but modifies — a tiered system on coal and natural gas severance taxes, lowering that hike from $42 million to $36.15 million, something Justice said Monday would primarily be from growth from current low price and production levels.
“We’re at such a low today, we feel like there’s going to be growth,” he said.
Senate President Craig Blair, R-Berkeley, a strong supporter of income tax cuts, and Senate Finance Chairman Eric Tarr, R-Putnam, raised questions about selling legislators on potential coal and gas tax hikes.
“There is concern in the Senate about using volatile, less predictable taxes to offset very stable taxes,” Tarr said.
Justice reiterated the problems he has with the Senate version of the tax plan, which will be up for a passage vote in the Senate Tuesday. That plan includes an 8.5% sales tax and no rebate plan for lower income West Virginians, who will be disproportionately hurt by higher sales taxes.
“Like it or not like it, it puts additional burden on those who struggle most,” he said.
Imposing the Senate’s sharply higher sales taxes without rebates will result in an “avalanche of voters” lining up to oppose the plan, Justice said.
House Finance Chairman Eric Householder, R-Berkeley, said the fact the Justice plan spends $52 million a year to pay rebates of $50 to $350 a year to persons with incomes of between $10,000 to $35,000 in order to make them whole is evidence the plan is flawed.
“The House plan right now has the conservative approach, the moderate approach. It doesn’t shift any taxes. It doesn’t raise any taxes,” Householder said.
The House plan would gradually roll back income taxes in annual multiples of $150 million, relying on purported economic growth to make up for the tax loss without any tax hikes.
Justice said Monday he believes the House plan phases out income taxes too slowly to achieve his goal of economic growth.
Blair, who strongly advocated for a similar income tax cut plan in 2017, said he believes it will encourage population growth statewide similar to that seen in the Eastern Panhandle in the past 50 years. Blair said that growth has been driven by low state property taxes and a high quality of life, compared to nearby metro areas.
Blair said he strongly supports increasing consumption taxes, saying of income taxes, “We’re putting nearly half of the tax burden in this state on the people who are willing to go to work.”
Monday’s session ended without resolution, but with Justice imploring legislators to keep working on the proposal.