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Justice revises budget proposal; tobacco, soft drink taxes part of plan

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — After lawmakers pushed back on his original 2017-18 West Virginia budget plan, Gov. Jim Justice on Monday unveiled a second version that reduces proposed increases in sales taxes, gas taxes and business gross receipts taxes, and makes up some of the difference with higher tobacco taxes and a tax on sugary soft drinks.

Gov. Jim Justice explains his new budget plan at a Monday afternoon briefing at the Capitol.
(Photo by F. Brian Ferguson)

“Here’s what it has to be for me: Balance the budget, but don’t cripple us,” Justice said at a Monday afternoon news conference, noting that he had worked overnight to come up with the alternate budget options.

“I’m working like blooming crazy to come up with pathways that will get us there,” he said of options to close a $500 million budget shortfall and help grow the state’s economy.

Justice criticized legislators who denounced his original budget plan, pointing out that they have yet to offer alternatives, with the regular legislative session one-third over, as of Monday.

“I’ve surely heard some criticism to the plan, but I haven’t heard back alternatives that we can do,” he said.

The governor said it would be “pitiful” if the Legislature required an extended special session to pass the budget, as occurred last year.

Later Monday, House Speaker Tim Armstead, R-Kanawha, and Senate President Mitch Carmichael, R-Jackson, issued a joint statement in support of Justice’s willingness to consider budget alternatives.

“We’re glad the Governor has heard the concerns of our constituents with his initial proposals and are heartened to know he is open to alternatives,” the leaders said. “Members of our Finance committees are working diligently to review the governor’s proposed budget to identify savings in each agency … . We are working night and day to solve this budget crisis, and are putting forward our own alternatives.”

The budget plan announced by Justice on Monday proposes no new spending cuts beyond the $26.6 million in his original proposal, but the governor said he’s willing to consider additional, responsible cuts.

“I’m not opposed to cuts, if they don’t cripple us,” Justice said. But he believes finding additional spending cuts “is going to be tough to do.”

“I’m not open to just putting a dagger into West Virginia that it won’t recover from,” he said of more severe budget cuts.

Revisions Justice proposed Monday to his budget original plan include:

Lowering the proposed increase in the consumer sales tax from 0.5 percent to 0.25 percent. That would provide $46.5 million in new revenue, as opposed to $92.7 million in the original proposal, he said.

Lowering a proposed business gross receipts tax from 0.2 percent to 0.0075 percent, raising $80.4 million, instead of $214.3 million, as originally proposed.

“This almost becomes next to nothing,” Justice said of the burden on state businesses.

Keeping the sales tax exemption on advertising, saying the additional $5.4 million of revenue was “just not worth” the additional costs to businesses, as well as administrative costs to the state. (The revised plan still calls for repealing sales tax exemptions for professional services, primarily legal and accounting services, to raise $78.9 million a year.)

To make up for those revenue reductions, Justice unveiled Monday what he called a “Better Health Initiative for West Virginia,” which would impose a 1-cent-per-ounce tax on sugary soft drinks, to raise $85 million, and a 50-cent-per-pack increase on cigarettes, to raise $47.8 million.

Justice said health advocates had convinced him the increases would not only raise revenue, but would help improve the health of residents.

“Gosh knows, it would have been great if I’d drank a few cans less of sweet soda pop,” he joked.

The tax would not apply to sugar-free beverages, and would not change the 1-cent soft drink tax that helps support the West Virginia University School of Medicine.

Justice’s new plan retains increases in wholesale liquor prices and beer taxes, to raise $5.6 million for tourism promotion.

Justice, the state’s only billionaire, also proposed tax surcharges on the wealthiest West Virginians, charging $500 for incomes of $200,000 to $249,000, $750 for incomes of $250,000 to $299,999, and $1,000 for incomes of $300,000 and over, to raise $8 million.

He also proposed “smoothing” payments to the Teachers Retirement System, to reduce the 2017-18 payment by $40.75 million. Justice stressed that is different from legislative proposals to refinance the 40-year plan to pay down the pension plan’s unfunded liabilities, a plan he said he’s “deathly against.”

“It would end up costing us billions of dollars over what we would save,” he said.

Justice also proposed spreading out a $105 million investment into his Save Our State Fund initiative over three years, reducing the impact on the 2017-18 budget by $70 million.

Justice also revised funding proposals for his plan to sell about $2.8 billion in road bonds for a public works initiative that he said would create 48,000 jobs.

He said the road construction package is critical to his plans to jump-start the economy.

“It does create immediate jobs — significant immediate jobs,” he said, estimating that payroll taxes from workers on the highway construction projects would top $200 million a year.

Justice’s new plan lowers a proposed increase in the state gas tax from 10 cents to 4.5 cents per gallon, but would increase tolls on the West Virginia Turnpike by $2 per toll, instead of the $1 increase originally proposed.

Under the proposal, the state would offer E-ZPass annual passes for $8 a year that would provide free travel on the Turnpike, as well as any other newly constructed highways the state might decide to operate as toll roads.

To comply with federal interstate commerce law, the optional $8 a year pass would be available to nonresidents, as well as state residents, he said.

“It’s going to cut into our revenue a little bit,” Justice said, explaining the need to increase Turnpike tolls to $4 under the proposal.

Under the revised plan, part of the road bonds plan would still be financed by raising DMV license renewals from $30 to $50 a year.

However, on Monday, Justice proposed changing state law requiring annual vehicle inspections to once every three years, which would reduce the net impact of the higher DMV fees to just over $10 a year.

“I’m all in. I’m working all the time,” Justice said of the budget proposal revisions. “I’m trying to find a pathway that makes it a little easier on everybody.”

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