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Gov. Justice outlines his income tax elimination plan in State of the State Address

MORGANTOWN – Gov. Jim Justice on Wednesday night outlined his vision for eliminating the state personal income tax and making West Virginia a destination state, through a combination of hikes in some other taxes, creating some new funding “buckets” and elevating two agencies to cabinet level.

He unfolded the ideas during his State of the State Address, delivered in the House of Delegates chamber – where COVID precautions necessitated masks and eliminated the usual packed crowd.

Justice opened by talking about how the state was on a roll before COVID hit and how the federal stimulus packages helped sustain its economy through the abrupt economic downturn.

But COVID will fade away and the packages will end, he said, and West Virginia needs a path forward.

“We are on the launchpad right now,” he said. “In fact we’re airborne right now.” To keep flying, he proposes repealing the income tax. “Now, how do you do that?”

He answered his own question: “Take one bite of the elephant at a time.” This fiscal year, personal income tax revenue is estimated at $2.`6 billion, nearly half of the $4.574 billion General Fund budget.

First step, immediately cut the income tax for most residents by half, except for the richest who will see theirs cut by just a third. He didn’t mention any income numbers.

That leaves about half of the revenue intact. To make up the losses, he revisited some old proposals and added some new ones.

Tier the severance tax on oil and gas. As a coal businessman himself, he said, the industry should be willing to step up and pay a tiny bit more.

Raise the sales tax by 1.5% to 7.5%. Raise the taxes on cigarettes and soda, which will raise revenue and have health benefits, he said. Tax professional services, establish a wealth tax and make some budget cuts totaling $25 million.

“It is so minuscule, it is unbelievable what I am asking you to do,” he said. “That is our chance. The door is right here for you, West Virginia. … Opportunity will flash for you and if you don’t go through it closes. … This is an opportunity beyond all comparison.”

Justice presented the Legislature with a flat Fiscal Year 2022 budget: $4.569 billion, a hair less than the current $4.574 billion budget.

He urged the Legislature to pass a flat, no growth budget for the next three years. And to establish two funding buckets.

One he called a closing bucket. Set aside $30 million to $50 million to entice out-of-state businesses to close and bring their employment to West Virginia.

The other would be a third Rainy Day Fund. There are now two, called simply A and B, and Justice said they’re in great shape. They haven’t been tapped for years, and FY 2019 and 2020 saw surpluses. The current surplus is $494 million.

Delegate John Williams, D-Monongalia, listens to the address.

Set that into a bucket for covering any shortfalls arising from eliminating the income tax, he said.

“My ideas surely can be tweaked. I will listen to any and everybody.”

But that’s only halfway to full elimination, he said.

The state economy is growing at roughly $300 million per year, he said. If people move here, it will blossom even more. “The growth alone will take you there,” if legislators resist the urge to spend and keep the budgets flat.

“You need to spend an unlimited amount of time addressing this issue,” he said. “The downside is nothing.” His proposal doesn’t touch property taxes or add new business taxes.

Justice briefly mentioned the two proposed new cabinet posts he’d like the Legislature to authorize. He wants an Economic Development Department with newly hired Economic Development Director – and former Senate President – Mitch Carmichael as secretary. “Mitch is on all the time. He could probably sell bread to starving Russians on credit.”

And he wants Tourism Director Chelsea Ruby to be secretary of a new Tourism Department. Tourism is now under the Department of Commerce.

Justice also briefly mentioned a few other initiatives.

He presented a bill to the Legislature to attract remote workers to West Virginia, consisting of a modernization of the corporate tax structure. He credited the idea to Intuit chairman Brad Smith, a West Virginia native who attended the address remotely. Justice said Smith has also made a donation to make the idea happen.

Justice has been involved in the Game Changers high school substance misuse prevention program. He said Game Changers and the West Virginia Drug Intervention Institute has partnered with the Hazelton Betty Ford Foundation to bring opioid and substance abuse prevention programs to all West Virginia schools.

He devoted a single sentence to again tyring to create an intermediate appeals court.

He acknowledged his COVID-19 leadership team and all the front line workers who’ve been battling the pandemic, particularly the National Guard. “We owe them so much.”

Worrying about people going out of state to buy cigarettes or soda is nothing, he said, compared to how many will come here as West Virgina continues to grow.

Over the next 10 to 20 years, “We have a chance of being the state that has the things we wanted so badly,” that other states have had, he said. “We’ll be the state that has them, the state that doesn’t have the bad things that other states still have. … We’ll be able to live in paradise, you all know that if you just look outside.”

He closed, “I won’t be satisfied until West Virginia’s success is no longer a surprise, but it is what is expected. I want every other state in America to know if they want to get to the top of the mountain in anything they do, they’re going to have to go right through the Mountain State to get there.”

Reactions offered

Various people offered comments after the speech.

The House Democratic Caucus said, “We also plan to hold the Governor and leadership accountable for their introduced legislation by asking: Who does this help? Who does this hurt? It’s time to put the people who currently live in West Virginia and our shared values first by creating opportunities for all West Virginians to stay, rebuild, and succeed here.”

Senate President Craig Blair, R-Berkeley, said, “Tonight, the Governor made it clear that West Virginia’s time to take bold steps to secure our future is right now. … We now must take the next step, and that step is removing our state’s personal income tax. … Cutting the personal income tax and bringing broadband internet to every corner of West Virginia will bring the prosperity we have seen in the Eastern Panhandle and the Morgantown area to the entire state.”

The American Federation of Teachers-West Virginia commented, “In a year when our students are at their most vulnerable, it’s very concerning that proposals to drastically cut state tax revenue and make budget cuts dominated the governor’s remarks. Education will never be our centerpiece if West Viringia doesn’t invest in the academic, social and emotional resources our students need or can’t attract and retain highly qualified educators.”

And West Virginia Republican Party Acting Chairman Roman Stauffer commented, “Tonight, Gov. Jim Justice outlined bold proposals that will continue to move West Virginia forward, reform our tax structure, attract more jobs and opportunities, hold state government spending flat, and focused on the tremendous success and heartbreak our state has experienced over the last year as it navigated the COVID-19 pandemic.”

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