Gov. Jim Justice is fixated on getting rid of the state income tax. For some time now he has believed with great conviction that having West Virginia join the other seven states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Wyoming) that do not have a personal income tax is a key to increased prosperity for our state.
Justice took a huge swing at that last year when he proposed phasing out the state income tax over several years. However, the plan was overly complicated, included raising other taxes and created the potential for a massive hole in the general revenue budget.
The Senate narrowly passed the plan 18-16. The House showed no interest in considering the bill until, after goading by Justice, the chamber voted it down 0-100. Talk about sending a message!
Now the governor is back with a much smaller proposal. His just-released tax plan would lower the income tax rates by an aggregate of 10%. The reductions would be retroactive back to Jan. 1, saving taxpayers $254 million.
Justice’s motivation is to provide some immediate tax relief for West Virginians struggling with high gas prices and inflation. However, he has not lost sight of his goal.
“Once we get the ball rolling, we can keep coming back and chipping away at our personal income tax until it’s completely eliminated,” he said in a statement released by his office. “When you see states like Florida, Texas and Tennessee, they have no personal income tax, and their state economies are growing like crazy.”
The governor has called for a special session starting Monday to consider his tax bill. The House will give a much warmer reception to this plan than his 2021 proposal. Earlier this year, the Republican-dominated chamber passed a very similar 10% across-the-board cut, but the plan failed in the Senate.
The Senate is a different story. Senate President Craig Blair, Finance Chair Eric Tarr and a number of their fellow Republicans prefer eliminating the property taxes on business equipment and inventory and on vehicles. But that is dependent upon voters passing Amendment Two in November empowering the Legislature to make that move.
Right now, Justice has the high ground.
He is halfway home with the House support, and he has the bully pulpit to rally public support. Notably, on the same day Justice unveiled his tax plan his office also put out a news release citing a poll by Morning Consult showing Justice as having the fifth highest approval rating of all governors in America.
Also, if the House passes Justice’s bill, will Senate Republicans want to turn their backs on reducing the amount of income taxes West Virginians pay, especially in an election year?
Justice’s impatience and desire to “go big” did not serve him well the last time he attempted to cut taxes. This is a much more modest approach, due in part to the federal government’s restrictions on using any of the pandemic relief money to lower taxes. This cut would be paid for out of the $1.3 billion budget surplus.
As is often the case, Justice did not build a consensus among lawmakers before rolling out his plan. The administration was still putting on the finishing touches moments before it was released to the public Wednesday. But that’s Justice, who is content with using his force-of-nature persona to get things done.
That approach failed with his tax plan last year. Maybe it will work better this time.