West Virginia’s governor pitches 50 percent income tax cut over 3 years

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CHARLESTON, W.Va. (AP) — West Virginia Gov. Jim Justice unveiled his most ambitious personal income tax proposal yet Wednesday: a 50 percent reduction over the next three years.

The Republican governor called the plan a “West Virginia tsunami” during his State of the State address, after lawmakers convened at the Capitol for the start of the legislative session. Justice said state legislative leadership told him to either to give up on trying to cut income tax or “make a big splash.”

“And so here comes me cannonballing into the pool,” he said, to applause from some members of the crowd gathered in the House of Delegates chamber. “By God, I’ll make a big splash. I’ll promise you that .. tonight I’m proposing our West Virginia tsunami that the world will hear in every single way.”

The tax cut would be incremental over the course of three years: 30 percent the first year, and then an additional 10 percent each year after that, Justice said. He is also proposing eliminating the car tax, a 5% raise for all state employees, a $1,500 bonus for some retirees and putting $100 million into the Public Employees Insurance Agency. PEIA is the health insurance provider for government employees and their families.

Justice said his proposed budget will again be “relatively flat” this year.

“I don’t believe in using the rainy day fund to bail me out,” he said. “I want to mind the store.”

Justice and legislators have been at odds on how to cut taxes for nearly two years. Senate GOP leaders are expected to offer their own proposals.

The governor suggested a permanent 10% reduction in the personal income tax in July after the state ended the fiscal year with a record $1.3 billion surplus. The state Senate refused to take up the proposal during a special session that month.

In October, Justice floated another plan, saying he wanted to eliminate a personal property tax that residents pay annually on vehicles. The following month, voters rejected a proposed constitutional amendment designed by state lawmakers that would have enabled lawmakers to eliminate a business and inventory tax, along with the personal property vehicle tax.

Kelly Allen, executive director of the West Virginia Center on Budget and Policy, said she is wary about the budget surplus and proposals to cut taxes.

Allen said a lot of the surplus is being driven by temporary funds: Around half of the surplus this year comes from severance taxes from coal, oil and gas, which can be “highly volatile.” Inflation also increases revenues because more money is coming in from sales tax. When employment is high, there’s more coming in from income tax.

“For anyone that’s been in West Virginia for any length of time, we know that the booms are always followed by busts,” she said. “Basing any permanent spending or permanent cuts on such a temporary boom would be really fiscally irresponsible.”

Allen said money has also built up because of the flat budgets lawmakers have passed the last several years — decisions she said have come at the cost of “pent up needs,” like the public employee shortages that are plaguing state agencies.

She said if lawmakers were to commit to addressing some of those unmet needs: “That’s pretty much the whole surplus. There’s really no money left over for tax cuts.”

During his speech, Justice also pitched a $5,000 moving bonus for veterans who want to move back to West Virginia. He proposed that school systems make all curriculum available to community members “where we can see every little thing that is being put into our little kids heads.”

“We have to make our schools safer, don’t we?” he said.