Gov. Jim Justice’s proposed 50% income tax cut “tsunami” may have swept through the House of Delegates on Wednesday, but it hit a wall Tuesday evening in the Senate Finance Committee.
Revenue Secretary Dave Hardy and members of the committee quickly began exchanging cross words during a presentation by Hardy on the state’s revenue numbers.
The Senate will certainly have more to say about Justice’s plan to reduce the personal income tax by 50% over three years. Senate Finance Committee Chairman Eric Tarr, R-Putnam, said Wednesday on MetroNews’ “Talkline” radio program that the governor’s bill, as it has been presented, stands no chance in the Senate.
During Tuesday’s discussion, Tarr asked Hardy if he thinks it is risky to go from a 10% cut, like Justice proposed last year, to a 50% cut based on a 24-month trend during a pandemic.
“Do I think it’s risky? I think it’s aggressive,” Hardy said.
The tax cut would be backed by the creation of the Personal Income Tax Reserve Fund, which would be infused with $700 million in surplus money to help offset the loss of revenue, which is projected at roughly $1 billion a year in fiscal years 2024-26.
Questioning Hardy after the presentation, Tarr asked what would happen once that fund is exhausted.
“So what do you suggest we do, since you trust the process, in 2027, when this Legislature has to come back and we’re eating into that $700 million at a rate, and we have to decide which services do we cut within our state government?” Tarr asked.
“Are we cutting State Police? Are we cutting our CPS? Are we cutting our senior services? Are we cutting Medicaid aggressively? Are we cutting higher education again? Or are we going to come in and raise taxes when this governor is no longer sitting in that seat?” Tarr continued.
“Are you done?” Hardy asked.
“Well, for now,” Tarr responded.
Sen. Rupie Phillips, R-Logan, brought up the Justice administration’s efforts to squash Amendment 2, a Senate-backed tax plan that failed to gain voter approval in November. Justice and Hardy went on a tour of the state in opposition to the measure and often referred to lawmakers as the “Charleston swamp.”
On Tuesday, Hardy said Amendment 2 would have built the base of the budget by 10% permanently, whereas the income tax cut proposal reduces revenue at a time when the state can use surpluses to make up the difference, if needed.
“I recall when you was down in Logan, you made the comment that Amendment 2 was a train wreck and a complete con, and it would cost the people $600 million,” Phillips said.
Phillips questioned the fiscal responsibility of eliminating over $1 billion a year in revenue.
“I don’t get your math. That’s phony math, is what I’m seeing, which I’ve heard that term, too, out of your mouth. I think that was in, maybe, Martinsburg,” Phillips said. “Don’t fall for funny math.”
“Funny math or phony math,” Hardy retorted. “Which was it?”
“I’m sorry. I read that wrong. Phony. Fake,” Phillips said.
Hardy said the voters spoke “very clearly on Amendment 2,” but Phillips was adamant that his problem isn’t with the will of the people.
“I’m talking about your words, not the voters’ words. Your words. Because you come down to Logan and pretty much called us crooks,” Phillips said.
Phillips said that, considering the range of problems facing the state government, from staffing shortages in the Department of Corrections to issues with the Public Employees Insurance Agency, a 50% reduction in the income tax seems unworkable.
“I guess you could say, ‘Where’s the pixie dust to make it work?’” Phillips said.
Sen. Randy Smith, R-Tucker, recalled a time just a few years ago when the state was $500 million in the red. He noted the instability of severance tax revenue from coal and natural gas. He also noted that the personal income tax is the state’s largest revenue stream, and that it was instrumental in righting the ship.
“It worries me going forward, if we make a 50% cut on our income tax and all the other things go south like it did before. And I realize you got a savings account, but a savings account only lasts so long. That’s my concern,” Smith said.
Justice political aspirations are driving his push to cut the tax, Smith said.
“He’s going to be gone. He’s going to leave being the man that gave a 50% reduction in income tax,” Smith said. “I might not be here, but a lot of them will still be here and will have to deal with this.”
He also made it clear that hard feelings remain where Amendment 2 is concerned.
“I can tell you firsthand that the governor is a hypocrite,” Smith said, addressing Hardy. “I hate no one, but I’ve lost a lot of respect for a lot of people over what happened in that. It hurts me that you got involved with it. The governor flat-out lied on us, and you helped him.”
