CHARLESTON – The West Virginia House of Representatives sent its version of an income tax exit to the Senate Monday in a largely partisan vote while Governor Jim Justice’s major cut bills stalled on committees.
House Bill 3300, relating to the general reduction in income tax rates, was passed by 77-23 votes on Monday. Delegates Mick Bates, D-Raleigh, and Ed Evans, D-McDowell, voted with a Republican majority, while Delegates Roger Conley, R-Wood, and George Miller, R-Berkeley, along with most of the Democrats, voted against the bill .
The bill also creates an income tax reduction fund from a portion of various sources of tax revenue and tax revenue. Once the ITR fund hits $ 400 million, $ 100 million will be transferred to the state general income fund, with the remaining $ 300 million used as a buffer for economic downturns.
“There are no tax increases or shifts of any kind in the bill in front of you” said Eric Householder, chairman of the House Finance Committee, R-Berkeley, when calling on members to vote for the bill. “There are tax breaks when you have a source of income. So, our small businesses, our transit businesses, our farmers and individuals here across the state today. “
The Treasury Department estimates the state will raise $ 2.041 billion in income tax for the next fiscal year beginning July 1, with income tax revenue adding approximately 43 percent of collections to the general income fund.
In an updated tax bill filed Friday by the Legislature’s Regulatory and Tax Department, it was estimated that HB 2022 would reduce personal income tax collection by $ 75 million for the 2022 calendar year. Assuming annual income tax growth remains constant, income tax could expire between 2034 and 2039, director Peter Shirley said.
“The tax authorities predict an average annual growth in income from income tax (PIT) from 2018 to 2026 of 3 percent per year.” Shirley wrote. “If growth averaged 3 percent per year, the PIT would be eliminated around fiscal 2039, a year later than if the growth rate was 2 percent per year. Taking into account the Income Tax Reduction Fund and our expected growth of $ 69.4 million per year, the PIT would be eliminated in FY 2034. “
An additional tax bill filed by the West Virginia Lottery on Friday stated that the skimming of their special revenue accounts, such as B. Revenue from KenoGo games, limited video lottery games and fees from expanding limited video lottery terminals, could affect the repayment of bonds and services for seniors and tourism and reduce the funding for the Promise Scholarship.
Doug Skaff, minority chairman of the House of Representatives, D-Kanawha, said HB 3300 creates too much uncertainty about whether future economic growth will offset the cuts called for in the bill. Skaff also raised concerns about the impact of federal coronavirus stimulus money on individuals as well as state and local governments, creating a false sense of security to drive tax reform forward.
“We have fake money from the federal stimulus plan this year that we can’t rely on every year, but we’ll be basing the next 12 years on last year’s success when fake money comes into our economy. That makes no sense,” Said Skaff. “I recommend a plan that doesn’t levy taxes. I’m all for our … Abolishing income tax, but not taking the risk of taking money from other programs. “
HB 3300 was also changed by Householder on Monday, shifting the effective date of the tax cut from January 2022 to July 2022 to coincide with the start of fiscal year 2023. With the Householder change, the state’s marriage penalty will also be lifted. Unsuccessful changes by the democratic legislature would have made future taxation of recreational cannabis possible and limited the tax cut to one year.
The House Finance Committee held a virtual public hearing on HB 3300 on Thursday. The West Virginia Chamber of Commerce expressed support for the House plan, as opposed to their opposition to Justice’s personal income tax cut plan. Chamber President Steve Roberts said membership in the Chamber saw HB 3300 as a better option to cut taxes.
“We asked them for their views on this law and they are very positive about the possible impact this law could have on our economy and the future of our state.” Said Roberts. “This bill applies to all income taxpayers. No winners and losers will be selected. Income tax rates are important tax rates. They are meaningful and meaningful. “
Opponents of the law believe it will cut government programs to keep up with annual income tax cuts. They also believe taxes still need to be increased and likely shifted to middle-class and low-income residents.
“House Bill 3300 is a bill that is neither modest nor a responsible alternative to the governor’s plan.” said Kelly Allen, executive director of the left-wing West Virginia Center on Budget and Policy. “This legislation deprives future lawmakers of the power to decide whether the economic and revenue conditions are right to lower taxes. There are no triggers, no breaks. It only forces the legislature to take more and more austerity measures. “
House Bill 2027 and Senate Bill 600, the governor’s tax reform plan, both remain on their respective committees. The judiciary spent last week holding town halls in Morgantown, Beckley, and the Eastern Panhandle to get public support for the plan, which will cut personal income tax rates by 60 percent from July of fiscal 2022 and a tax rebate for residents who earn less would grant as much as $ 35,000 a year.
Justice’s entire tax proposal and tax break would cut state tax revenues by $ 1.088 billion. The judiciary proposed tax increases of $ 902.6 million to fund the personal income tax cut. Business groups and tax reform organizations oppose the governor’s plan because it does not lower the income tax rates used by small businesses and sole proprietorships, removes tax exemptions for professional services, and increases excise taxes.
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