By May 5, 2017 Read More →

WV House rejects Justice’s budget proposal as special session begins

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — A special session to come up with a revenue fix to close shortfalls in the 2016-17 West Virginia budget got off to a fitful start Thursday as members of the House of Delegates voted 59-36 to reject Gov. Jim Justice’s plan to balance the budget by raising nearly $300 million in new taxes while cutting income tax and severance tax rates (House Bill 104).

House Speaker Tim Armstead, R-Kanawha, gavels out Thursday during the special session at the West Virginia Capitol.
(Photo by Justin Rogers)

That vote likely derails hopes for a quick compromise on the state’s 2017-18 budget plan, paving the way for a second legislative budget impasse in as many years.

After the vote Thursday evening, House Speaker Tim Armstead, R-Kanawha, called on Justice to recess the session to give legislative leaders time to come up with a “fair tax structure.”

“We believe the people of West Virginia are taxed enough,” Armstead said, backed by most Republican members of the House, who accounted for the mostly party-line vote rejecting Justice’s revenue plan. “They cannot bear the types of taxes that are embodied in House Bill 104.”

The House vote was in sharp contrast to support for the plan in the Senate, where Senate President Mitch Carmichael, R-Jackson, earlier Thursday predicted that as many as 30 of the 34 senators would vote in favor of the bill.

“This a transformational, fiscally conservative plan,” he said. “I’m getting a little frustrated by comments from some entities and outlets saying this is somehow construed as a tax increase. Nothing could be further from the truth … It’s a tax cut for West Virginia citizens, and it holds the line on spending.”

Justice was not available for comment after the House vote, but he tweeted, “Speaker Armstead just played politics and blocked bipartisan tax cuts for WV families.”

Justice administration officials had been negotiating the proposed revenue plan with Carmichael and Senate leaders since the final day of the regular session, on April 8, while Armstead and House leadership complained that they had been effectively left out of the budget talks.

Carmichael said the proposed compromise bill incorporates 80 percent of Senate proposals, including a plan studied by Senate Republicans throughout the regular session to lower income tax rates, making up the lost tax revenue through increased sales or “consumption” tax rates.

On Thursday, Carmichael disputed critics who say that plan shifts tax burden from the wealthy to the working class, saying the plan being tweaked by the Justice administration would provide larger percentage reductions in tax rates for the lowest tax bracket than for the middle and upper bracket.

Armstead said the bill’s proposed 1 percent increase in the sales tax rate and a temporary increase in the corporate net tax are unacceptable to House Republicans.

The House vote Thursday evening was the culmination of a rocky first day of the special session, as both houses met just briefly Thursday morning while waiting for Justice administration officials to iron out details in the revenue bill.

Carmichael characterized it as tweaking numbers in the severance tax and income tax rates, while House leadership called it a bungled start and a waste of time and money.

“It’s true that all the components of it aren’t ironed out, and as evidence, we don’t have the bill,” Carmichael said Thursday afternoon, disagreeing that the start of the session was bungled.

“I’m not looking necessarily to poke holes at any mistakes,” he said. “I’m looking forward to finding a way through this process that gets us to what I believe is a tremendous benefit to the people of West Virginia — a tax cut on personal income and a balanced budget that barely increases spending.”

Carmichael said the Justice administration was tweaking numbers on the portion of the bill that reduces state income tax rates by nearly 20 percent — about $384 million a year — and negotiating with coal lobbyists over the bill’s proposed setting of tiered rates for severance taxes based on market prices, which, at the moment, would amount to a tax hike on metallurgical coal used in steel production.

Carmichael predicted as many as 30 of 34 senators would vote for the revenue package — a sharp contrast to the House, where opposition remains strong to the revenue bill and legislation to raise the state gas tax and various Division of Motor Vehicles fees to raise about $130 million a year for road construction — and to eventually provide a revenue stream for a portion of $2.4 billion in road bonds Justice wants to sell as part of a major road-building/economic stimulus plan.

“He’s working with all his persuasive powers to get this done,” Carmichael said of Justice’s efforts to garner support in the House, prior to that chamber’s vote rejecting the revenue plan.

On Wednesday evening, Justice sent an email memo to House Republicans, disputing Armstead’s allegations that he and House leaders had been shut out of budget negotiations with the Justice administration.

“I, my chief of staff, and my team have welcomed any and all meetings with the speaker, or any House or Senate Democrat or Republican to compromise on budget issues,” Justice said in the memo.

Justice said he has had multiple meetings with Armstead and his leadership team at the Governor’s Mansion and at his Capitol office, and said, “I continue to welcome that dialogue.”

Justice’s memo continued with, “That said, here’s what is at stake tomorrow — we’re going to fix the budget crisis by reforming the tax code, protect West Virginians from Draconian cuts, and create 48,000 new jobs — with almost no increase in state spending over last year.”

Last year, the Legislature met in special session for 17 days over a two-month period, before the House finally acquiesced and passed a $98 million increase in tobacco taxes to help close that year’s budget gap.

Legislators passed the 2016-17 budget plan on June 14, avoiding a state government shutdown on July 1 by just 16 days.

Both houses have floor sessions scheduled for 11 a.m. today. Costs for legislative pay and expenses in special session run slightly more than $35,000 a day.

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