By PHIL KABLER
CHARLESTON, W.Va. — With no resolution to the legislative budget impasse, West Virginia lawmakers took a new direction Wednesday, on the 13th day of the special session, putting a revenue measure (House Bill 107) into a House-Senate conference committee.
That follows days of informal, closed-door meetings, many brokered by Gov. Jim Justice, who declared himself to be “mediator in chief” and practiced a type of shuttle diplomacy by moving from groups of House of Delegates and Senate Republican and Democrat leaders to try to come up with an agreement.
Tuesday afternoon, Justice urged legislators to move quickly on his latest proposal, a 6.35 percent sales tax increase, coupled with a 7 percent reduction in income tax rates — with future reductions of 7 percent and 6 percent, if yet-undetermined targets for economic growth are met.
“It’s as good as we’re ever going to get,” he said of the proposal.
“I want this to be over, and I want it to be over right now,” Justice said of the impasse, and warned that legislators will be held responsible for any state government shutdown if they fail to pass a workable budget before the new fiscal year begins July 1.
Senate President Mitch Carmichael, R-Jackson, said one of the two major sticking points has been the “triggers” for the subsequent years of income tax cuts — Senate Republicans want an aggressive schedule, while delegates have raised concerns about lost revenue, and House Democrats have proposed a “reverse-trigger,” to restore the current tax rates if the cuts fail to generate promised economic growth.
The other major sticking point, he said, is raising the sales tax, with Senate proposals going as high as 8 percent, while many House members have been wary about even the latest proposed increase to 6.35 percent.
“Frankly, it’s not what everbody wants,” Carmichael said of the revenue proposal. “Many people will say a good deal is when everyone walks away and no one’s particularly happy with it.”
The newly appointed conferees met for about a half-hour Wednesday afternoon, going over a side-by-side comparison of the original House and Senate revenue plans, and receiving an update on ongoing negotiations during the first 12 days of the special session.
“Obviously, there’s been some negotiations over the last couple of days in particular,” said Senate Majority Leader Ryan Ferns, R-Ohio.
He said there seems to be general consensus for a sales tax increase to between 6.35 percent and 6.5 percent, and for an incremental reduction in income tax rates to 7 percent, 7 percent and 6 percent — with economic triggers to be met for the second and third phases of the cuts.
Much of the discussion Wednesday was over how to set the triggers so they would not be so high as to be unattainable but also not so low so that a one-year spike in revenue — such as last year’s $98 million tobacco tax hike — would set off a potentially financially devastating revenue cut.
Nick Casey, Justice’s chief of staff, said the Governor’s Office is interested in looking at a five-year average of some composite of economic growth, possibly a combination of increased state tax revenue, growth in the consumer price index and, possibly, increases in state employment numbers to trigger the future income tax cuts.
“The governor’s vision of this is that a reduction of personal income tax is a way to foster growth, and also foster retention of West Virginians,” Casey said, suggesting that lowering or eliminating income taxes on retirees could discourage them from moving to low- or no-income-tax states.
The House and Senate versions of the revenue bill would completely eliminate income taxes on military pensions, and would reduce, to varying degrees, income taxes on Social Security retirement benefits.
The conference committee meeting marked the first public meeting on the revenue proposals in the 13-day special session, with all prior meetings and talks taking place behind closed doors.
House Finance Chairman Eric Nelson, R-Kanawha, serving as the committee chairman, said the panel will meet again at 9 a.m. today, at which time conferees will receive a new, “strike-and-insert” compromise revenue plan and a financial overview of the proposed tax changes.
Carmichael on Wednesday appointed Sens. Ferns; Craig Blair, R-Berkeley; Ed Gaunch, R-Kanawha; Roman Prezioso, D-Marion; and Glenn Jefferies, D-Putnam; as Senate conferees.
House conferees appointed Wednesday afternoon are Delegates Nelson; Paul Espinosa, R-Jefferson; Carol Miller, R-Cabell; Brent Boggs, D-Braxton; and Dave Pethtel, D-Wetzel.
Notable omissions from the conference committee are Senate Finance Chairman Mike Hall, R-Putnam, who has expressed concern about the Senate plan to rollback income tax rates; and Sen. Robert Karnes, R-Upshur, chairman of the Senate Select Committee on Tax Reform and the lead architect of the income tax cut plan.
Also Wednesday, Delegate Mike Pushkin, D-Kanawha, provided delegates with copies of a Kansas City Star report outlining action taken Tuesday in the Kansas Legislature to rollback income tax cuts enacted in 2012 that have caused massive budget deficits in that state.
“It seems to be the mantra for the leadership in the Senate that this is the path we should be following in West Virginia,” said Pushkin, who noted that, unlike West Virginia, Kansas had budget surpluses at the time it enacted its income tax cuts.
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