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Budget compromise bill may combine Justice’s revenue plans, Republican tax reform


The State Journal

CHARLESTON, W.Va. — A proposed budget compromise that is currently on the table might combine key aspects of Democratic West Virginia Gov. Jim Justice’s revenue framework with tax reform proposals favored by Republicans in the West Virginia Legislature.

Gov. Jim Justice continues to try to draw the West Virginia House and Senate together to agree on a budget that includes both budget cuts and tax increases.
(WV Legislature photo)

Justice spokesman Grant Herring confirmed Tuesday, April 18 that budget discussions between the governor’s office and leadership in the state Senate and House of Delegates include raising the state sales tax to up to 7 percent, instituting temporary taxes on the very wealthy, a commercial activities tax on gross business receipts, modifying the severance tax structure on coal and natural gas, raising consumer taxes on gasoline and raising fees for services provided by the Division of Motor Vehicles to fund road construction projects — all key components of the budget proposal put forth by Justice at the beginning of the regular legislative session in February.

Also under discussion are plans to expand tolling on state roads, and a proposal to lower or eventually phase out the state personal income tax and reduce the number of tax brackets.

“In essence, this is a revenue-neutral tax reform proposal,” said Senate President Mitch Carmichael, R-Jackson. “We’ve kind of embraced some of (the governor’s) ideas and they’ve kind of embraced some of ours, and we’re talking to our House colleagues.”

Justice, Senate leaders and House leaders came up with significantly different budget proposals during the 60-day legislative session, leading to a last-minute budget bill that was ultimately vetoed by the governor.

Carmichael said budget discussions are still young, and will require agreement by Justice’s office, the House and Senate.

“This is all in concept and theory right now,” Carmichael said. He said some parts of the budget proposal, like the commercial activities tax, are not going to meet with legislative approval.

In the waning hours of the regular session, Justice announced he had reached an agreement with Senate leaders to attempt to pass a budget bill based on most of the governor’s budget proposals. That agreement, put forth in a budget amendment sponsored by Sen. Ryan Ferns, R-Ohio, did not survive the night.

But if the Ferns amendment is the basis for a budget compromise, the people of West Virginia will end up getting hurt, according to Ted Boettner, executive director of the left-of-center West Virginia Center on Budget & Policy.

According to an analysis the center conducted, the personal income tax reductions and further reductions of severance taxes in the budget proposal would cost the state about $115 million in lost revenue in 2018. The proposed tax changes also would amount to a tax increase for 80 percent of West Virginians who make less than $84,000 a year and provide a tax cut for most of those who make more than $84,000 a year, Boettner said.

“West Virginia needs tax reform and a budget that works for working West Virginians, not against them,” Boettner said. “West Virginia already has an upside-down tax system that asks more of low- and middle-income earners. We should be working in the opposite direction and trying to turn this upside down tax system rightside-up.

“West Virginia needs common sense tax reform that rebalances the state’s tax system while providing enough revenue to close the state’s $500 million budget gap and invest in the building blocks of thriving communities, such as schools, public colleges, transportation, and public safety,” he added.

Senate Finance Committee Chairman Sen. Mike Hall, R-Putnam, said he would prefer to see a more modest sales tax hike to help the state’s financial woes, and is leery of reducing or eliminating the personal income tax.

Hall also was unsure how difficult reaching a budget compromise may prove.

“There’s a sharp divide between the House and Senate, and the House and the governor, about this tax reform issue,” Hall said.

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