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Justice, Senate GOP pitch one last income tax plan


The Herald-Dispatch

CHARLESTON, W.Va. — If CPR is a shortened form of cardiopulmonary resuscitation, then legislation proposed by West Virginia Gov. Jim Justice and approved by the Senate on Thursday could qualify as PITR, personal income tax resuscitation.

West Virginia Senate Finance Committee Chairman Mike Hall, R-Putnam, center, talks with Sen. Bob Plymale, D-Cabell, left and Senate President Mitch Carmichael Wednesday. The Senate passed a new revenue measure Thursday for fiscal year 2018, and senators were considering a new budget at press time Thursday.
(Photo by Perry Bennett/West Virginia Legislative Photography)

Just before 10:30 p.m. Thursday, the Senate finished its business in approving a new $4.349 billion budget proposal and new revenue bill that struck some familiar chords that included lowering the personal income tax, with a new addition of rebates for people in the lowest tax brackets, and an increase of the state’s sales tax.

It was a plan that House of Delegates Speaker Tim Armstead earlier in the day said would not pass muster in the House of Delegates.

With 17 days to go before a possible government shutdown, the governor announced the new revenue legislation after a meeting he had with lawmakers and lobbyists Thursday morning that led to its own controversy.

At least one delegate present said the meeting was a violation of the state’s open meetings law because there were enough senators present to constitute a quorum, and Armstead said the presence of the lobbyists was an attempt to pressure lawmakers into conceding to Justice’s revenue proposal.

Members of the media found out about the meeting by seeing lawmakers entering the governor’s conference room just before 10 a.m. and weren’t permitted inside.

About 10 hours after the meeting ended, the Senate’s new budget bill was passed with an estimated general revenue fund of $4.349 billion for fiscal year 2018, which included funding from the revenue measure passed in the Senate as well as $130 million in anticipated revenue from economic activity related to Justice’s proposed roads bills, which were still up for consideration by the House of Delegates on Thursday.

The revenue estimated in the bill was enough to keep a 2 percent pay increase for the state’s classroom teachers, and it fully funded the West Virginia Department of Health and Human Resources, including Medicaid.

The only cuts made in the budget were to Marshall University, West Virginia University and their medical schools, all of which sustained 2 percent cuts to their state allocations.

The Senate convened only once Thursday, at 8 p.m., when senators took swift action in passing the budget, Senate Bill 1018, and the revenue measure in the form of Senate Bill 1017.

The revenue measure and the budget bill weren’t unveiled until the Senate convened Thursday evening.

The Senate passed the revenue bill, Senate Bill 1017, after about 20 minutes of explanation and debate by a margin of 30-2, with Sen. Mike Woelfel, D-Cabell, and Sen. John Unger, D-Berkeley, being the two dissenting votes.

The budget bill was approved by a margin of 30-2, with Sen. Robert Karnes, R-Upshur, and Sen. Patricia Rucker, R-Jefferson, being the “nay” votes.

At press time, the actual text of the bills had not been uploaded to the West Virginia Legislature’s website, but Senate Finance Chairman Mike Hall provided a description of the budget and revenue bills on the Senate floor prior to the Senate’s vote.

Sen. Charles Trump, R-Morgan, was the only senator to speak about the revenue bill prior to the vote, and he said he thought SB 1017 was the best version of any revenue plan that had been developed so far in the special session.

“Twenty-four hours ago I was ready to throw in the towel,” Trump said. “I think I may have said so. I was wrong. I was wrong. I credit (Senate President Mitch Carmichael) and the other members of this body and our governor and others for saying, ‘No, Charlie. It’s been a long and contentious session, but it’s not necessarily over. It’s not too late for this to happen.'”

The revenue bill passed by the Senate was more detailed than what Justice described earlier in the day.

At the top of the measure is a 20 percent reduction in the personal income tax, which would take place in four phases, 5 percent at a time.

The first reduction would take place during fiscal year 2018, and the subsequent three reductions would take place pending triggers that take into account rolling averages of certain tax revenues against the cost of the personal income tax cut, Hall said.

It also adds a rebate check for people in the two lowest tax brackets, but the entire tax bracket structure established in the bill wasn’t available at press time Thursday.

People making less than $10,000 in the 2016 tax year would receive a rebate check of $150, and people making between $10,000 and $25,000 would receive a check of $100, Hall said.

The bill also increases the sales tax to 6.5 percent, and it would be reduced to 6.25 percent after the personal income tax rate completed the 20 percent reduction cycle.

The bill also would remove the sales tax exemptions for certain goods and services. If the bill becomes law, West Virginians will begin paying sales taxes on telecommunication services, except ancillary telecommunications, digital goods and services, and direct use communications. The sales tax also would be charged to transportation services, with the exception of coal transportation services.

Hall said the revenue bill also prevents an $11 million transfer from the general revenue fund to the state’s roads fund.

The bill also eliminates income tax on military retirement income, and it eliminates income taxes on Social Security income in two phases for individuals with a federal adjusted income of $50,000 or less. The Social Security income tax would be eliminated in two phases in fiscal years 2018 and 2019, with it being completely gone by the start of fiscal year 2020.

Under the provisions of SB 1017, the personal income tax exemption for West Virginians making less than $75,000 would be increased from $2,000 to $2,500.

The fate of the new revenue measure remains to be seen, but Armstead said Thursday afternoon that any personal income tax reform had “virtually zero chance” of being passed at this point in the special session.

“There’s a great deal of interest in tax reform, but you’re not going to get a tax reform bill in two weeks,” Armstead said. “If (Justice) is insistent on that, he is closing the government down. There is no question about it.”

Prior to the passage of the Senate’s revenue bill and introduction of the new budget, another event stirred some contention among lawmakers Thursday.

Several lawmakers, mostly members of the House, were visibly upset as they left the Thursday morning meeting among senators, delegates, Justice, and some coal industry and higher education lobbyists.

Various reasons were given as to why people were upset.

Justice implied that Karnes made comments that led to House members walking out, and Armstead said lobbyists from the coal industry and higher education were present in the meeting, which “offended some people or at least bothered people.”

It also appeared to Del. Shawn Fluharty, D-Ohio, there were enough senators in the room to constitute a quorum, which meant all of the business and discussion that took place during the meeting would be a matter of public record.

“The way the open meetings law works is if there’s a quorum and we’re deliberating over something we may vote over, if it’s a deliberative process, it’s supposed to be open to the public,” Fluharty said. “I believe there was a violation.”

It takes 18 senators to constitute a quorum in the West Virginia Senate, but no one who was in the meeting Thursday said how many senators were in the meeting.

Carmichael, R-Jackson, said he was under the impression the meeting had been an open one, but when he learned media had been kept out, he said he was willing to talk about anything that happened during the meeting.

Thursday was the 19th day of the first special session of the 83rd West Virginia Legislature.

Fiscal year 2018 begins July 1, 2017, and the state government would shut down, except for essential services, if a budget isn’t passed.

The cost for the legislative session is $35,000 per day if every lawmaker is present in both chambers when both legislative bodies convene.

The House will convene at 10 a.m. today, and at press time Thursday, the Senate had not scheduled a time to convene.

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