By ANDREA LANNOM
CHARLESTON, W.Va. — Gov. Jim Justice said Thursday that he hopes the final budget bill will include either an increase in the sales tax or an increase on cigarettes and soft drinks — either one, he said would bring in $45 million to state coffers.
Justice and his chief of staff Nick Casey spoke to the press Thursday about the status of the budget and what he hopes can be accomplished in these final days of the Legislature.
Casey said cuts include a continuation of the 2 percent mid-year across-the-board cuts, additional cuts to public education, cuts to higher education and the arts, a small cut to the Department of Commerce, and cuts to the Department of Military Affairs and Public Safety — with the largest part from DMAPS coming out of corrections.
There also is a $4 million cut to the Department of Health and Human Resources, but Casey said this does not include Medicaid matching funds. He said the largest is from the smoking cessation program.
Justice’s Save Our State fund also was cut from the original $105 million to $35 million and then finally, to $20 million, which will go toward promoting West Virginia, upgrading commercial sites and the ultimate goal of attracting business to the state.
Justice said he has participated in discussions with legislative leadership, but got “right to the altar” and said lawmakers couldn’t make a decision between the sales tax or taxes on cigarettes and soft drinks.
“I’m not going to cast stones, but the net net is that it went right to the altar and they couldn’t make a decision. It needed to go to vote. The decision all centered on the possibility of raising consumer sales tax a quarter of a penny or, if they didn’t want to do that, have the cigarette tax and lower the soda tax.”
Justice met with legislative leadership in the House later Thursday to discuss the budget. Spokesman Grant Herring said the conversations were very productive, but did not elaborate.
House Majority Leader Daryl Cowles, R-Morgan, also said the governor’s meeting with the Republican caucus went well.
“He gave perspective on the budget and although we didn’t come to a resolution or grand compromise, the tone was helpful,” Cowles said.
Cowles said Justice brought up both ideas of increasing the sales tax or the tax on cigarettes and soft drinks.
“We were listening but I don’t think there is much of an appetite to increase taxes,” he said. “We are wanting to live within our means. We did come to some common ground on tax reform.”
The Senate passed a bill Wednesday that would lower personal income tax, dividing it into three brackets, and also create a consumption tax.
A consumption tax would be created at a rate of 7 percent and the tax on food would come back at a rate of 3.5 percent. The bill also eliminates some exemptions.
The House version of of the bill didn’t make it through “crossover day,” the day that bills must move out of their house of origin. House Bill 2933 would have reduced consumer sales, service and use taxes, and broadened the base of items that can be taxed.
Delegate Eric Nelson, R-Kanawha, who chairs the House Finance Committee, explained that there were problems with the House bill, including several amendments that, in his view, didn’t make sense. He also said there wasn’t much support among members for eliminating professional exemptions.
The House can use the Senate’s bill as a vehicle for the budget, choosing to amend it and refine its proposals or it could adopt the Senate bill and let its own slide. Nelson said Thursday that there is still a lot of work to be done.
Casey said that there are “vehicles” for revenue from the Senate bill that passed Wednesday. He said he hopes the bill will be amended to include some of the governor’s proposals into that legislation.
Justice wasn’t thrilled about the idea of lowering the state income tax just yet, saying it’s something West Virginia should strive to implement. However, he said this isn’t the first step of the process and is something that is farther down the road.
“The patient is dead and in intensive care. That’s jumping the patient and saying ‘we’re taking you to the Olympics.’ If we do that, the numbers show catastrophic results. The math shows we may awaken to a $1 billion hole in the bucket.”
Like some members of the Senate, Justice said he also is concerned about the possibility of shifting the tax burden to lower and middle income families by eliminating the income tax.
“If tomorrow we eradicate the income tax and replace it with a consumption tax, that will change everything across the board. Who is going to pay? Who is going to carry the burden? The people. The average everyday person. Who will get off scot free? Jim Justice. The rich guy. It puts all the burden on the everyday guy and it gives Jim Justice a break. I don’t think it’s right.”
Cowles said he didn’t know if lowering personal income tax would ultimately make it through the process, but he did feel that what would be closer to the final product is broadening the base of sales tax and lowering the rate. He said there is more momentum for that to happen.
“It was a good conversation and a good back and forth,” he said. “We have a better understanding of his priorities but that’s not to say a deal is imminent,” he said.
Justice said he only will veto a budget proposal if he thinks it will hurt the state in the long run.
“All I have to say is the philosophy has to be that it cannot paralyze the state and cut things that are imperative to our state,” he said. “It has to give us a pathway out of this and gives us hope and prosperity. … If the answer is more people are going to leave the state, then I’m going to veto it.”
After Thursday’s floor session, Nelson said he couldn’t address the governor’s comments directly because he hadn’t heard them but said in his view, Justice is continuing to give the same revenue measures, in particular consumer sales tax and taxes on sugary drinks and tobacco.
“We are committed to to looking at broadening consumer sales tax and lowering it,” he said. “We had the bill yesterday but unfortunately, we didn’t have the ability to have the cooperation from all 100 members.
Nelson also addressed the consumption tax and the criticism that it would shift the burden to residents. He said the House is doing what it can to balance the budget without putting undue burden on residents. He said consumer sales tax won’t just hit West Virginians but people who shop from out of state as well.
“Is that not what he’s doing with his quarter of a penny for sales tax? Is that not shifting to consumers?”
Delegate Mick Bates, D-Raleigh, attended Thursday’s press conference and said he thinks the governor accurately summed up where the Legislature stands on getting a budget. He expressed concern that time is running out and there is still much to do.
“I am concerned that we’ve not yet got the job done and we have nine days to go,” he said. “This has consequences for all of West Virginia. We are getting at a point where we are focusing on a limited number of options because they’re running out.”
He said the Senate’s bill is the only revenue vehicle available and will need to be “substantially amended to achieve anything.”
“The big thing that occurred last week is the realization that we can’t close the hole without a revenue measure. They call it tax reform but it is a tax increase. They have called it cutting the fat, living within our means, cutting fraud, waste and abuse and have said no new taxes. And now with nine days to go, we have to do what we should have been doing from the beginning — identifying revenue measures that everyone can live with. It’s frustrating.”
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