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Latest Justice plan retains WV tax cuts, but not for higher incomes

By PHIL KABLER

Charleston Gazette-Mail

After a weekend of negotiations with House and Senate leaders, Gov. Jim Justice is pitching a tweaked version of the 2017-18 West Virginia revenue plan that retains income tax cuts — but with no cuts for residents with incomes of $300,000 or more.

It also includes increases in the state sales tax, but at 6.35 percent, instead of the 6.5 percent increase being considered by a House-Senate conference committee.

“The belief that this was a way to help the wealthy with their tax relief — get that off the table. That was completely wrong,” Justice said at a news briefing Monday, addressing a major concern of opponents of the revenue proposal, who see it as shifting tax burden from the wealthy to the working class.

That includes Democrats in both houses, whom Justice met with for nearly 90 minutes Monday afternoon to try to sell them on his latest proposal.

As for the Democrats’ reception to his latest proposal, Justice said, “I thought it was very good.”

However, House Minority Leader Tim Miley, D-Harrison, said earlier Monday that he believes it’s probably too late to persuade House members and Senate Democrats to reconsider their opposition to income tax cuts.

“There’s no way in hell there’s a reduction in income taxes,” Miley said, assessing the current atmosphere in the Legislature.

Justice said Monday it is high time for the Legislature to approve a revenue plan and that his plan is the only option that avoids the “carnage” of major budget cuts.

The governor said he came up with the new compromise proposal after a lengthy meeting Saturday with House Speaker Tim Armstead, R-Kanawha, and Senate President Mitch Carmichael, R-Jackson.

Justice said that if his new revenue plan including income tax cuts is defeated, Senate leaders plan to offer a “bare bones” budget with no tax increases that would require at least $170 million in additional spending cuts, while House leadership would fall back to a plan the House passed earlier that keeps the sales tax at 6 percent but “broadens the base” by eliminating several existing exemptions in the law. That proposal would require $40 million to $70 million in additional budget cuts.

As to whether he would veto either of those alternatives — as he did on April 14 with a budget bill passed in the waning moments of the regular session that would have imposed $160 million of spending cuts — Justice said, “I would be really motivated to veto anything that would come to me that would hurt people.”

Justice said his revenue plan would fund a 2017-18 budget with no additional cuts. He said it also would include pay raises for classroom teachers, and full income tax exemptions for military pensions and Social Security retirement benefits.

“I hope to goodness they’ll vote this way,” Justice said of legislative action on his latest proposal. “We should have done it today, to get us off the taxpayers’ dime.”

Monday was the 16th day of the special session on the 2017-18 budget, with each day costing approximately $35,000 for legislators’ daily pay and expenses. As of Monday, there were 18 days remaining until the new budget year begins July 1 — a date that will see the start of a partial state government shutdown if the 2017-18 budget has not been enacted.

Later Monday, Justice met with House Republicans in caucus, and members remained in caucus for an extended time after his appearance.

Afterward, House Finance Chairman Eric Nelson, R-Kanawha, would not say if there was support for the new proposal in caucus, but he did say, “I’m committed that we’ve got to get something done this week.”

House-Senate conferees working on the revenue plan (House Bill 107) met briefly late Monday afternoon, but did not take action, pending receipt of revenue figures on Justice’s new proposal from the Governor’s Office, expected in time for a 9 a.m. meeting Tuesday.

“Tommorrow, we can have full discussion in committee, and proceed to where this conference report goes,” Nelson said Monday.

It was the first meeting of conferees since a meeting of about 15 minutes Friday afternoon.

Nelson said determining the economic goals, or “triggers,” that would cause additional phases of the proposed income tax cuts to take effect remains the stumbling block for conferees.

Justice’s latest proposal adopts the initial framework proposed by Senate Republicans to lower the income tax rate by 7 percent, effective Jan. 1, 2018, with subsequent cuts of 7 percent and 6 percent to follow in years when annual triggers are met.

Justice said Monday that he would leave it to the conferees to set the triggers, saying he has confidence in co-chairman Nelson’s judgment.

“He has been overprotective, and overconserative,” Justice said. “He wants to build in assurances that we won’t trigger unless things are really good.”

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