Governor Jim Justice has a public question about his proposal to phase out state income tax.
“What if I’m wrong? What if nobody comes to West Virginia when we do this? What have we lost? “
The judiciary announced the income tax proposal this week during his speech on the state. Income tax brings in about $ 2.1 billion a year and makes up about 43 percent of the state’s general fund.
The judiciary proposes lowering income taxes in order to market the state as a place of residence or settlement. He envisions West Virginia as the only state in the east with no income tax.
“West Virginia with this proximity, and West Virginia with the economy we have today, we can do that,” Justice, a Republican, said on MetroNews’ Talkline today.
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have state income taxes. Two others, New Hampshire and Tennessee, do not tax earned income.
“It’s the most important thing that has the most sex appeal one could have,” said the governor.
Members of the state legislature will debate the income tax proposal for the next 60 days. The judiciary has suggested that his proposal is just a starting point and says he is open to tweaking it.
Democrats are already expressing skepticism.
“I find it hard to believe that most West Virgins will see a net relief in their taxes,” said Senator Richard Lindsay, D-Kanawha.
Doug Skaff, minority chairman of the House of Representatives, D-Kanawha, said the outline of the judiciary has many holes.
“This is not a drop in taxes. This is a tax shift, “said Skaff today on” Talkline “. “The miracle will be how to balance a budget when you have a $ 2.5 billion hole.”
Skaff summarized: “It doesn’t add up.”
. @ DougSkaff speaks to @HoppyKercheval about his opinion on the governor’s plan regarding state income tax and how he sees it affecting the West Virgins. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/Y43n3HjaFU
– MetroNews (@WVMetroNews) February 11, 2021
The governor suggested taking several additional steps to make up the difference. But almost everyone raises additional questions:
– He proposed a first step to lower income tax for all residents except the highest earners. “You cut theirs by a third, but you cut everyone else by half,” said Justice, who did not define those income levels.
– The judiciary, whose family has coal reserves, proposed a tiered system for oil, gas and coal. This is a revision of a concept that was endorsed by Justice in 2017. If profits rise, companies would pay more under the plan. When profits go down, they pay less. The judiciary did not say how this could affect total government revenue collections.
– He suggested increasing sales tax by 1.5 percent. Sales tax is currently 6 percent.
– The judiciary suggested increasing sales tax on cigarettes and soda “to make us healthier and better – and that could be a source of income for us.” He didn’t specify how much.
– He suggested taxing professional services but did not say which or how much. This can include business sectors such as legal representation, accounting, advertising, hair care, or contract services.
– He proposed a wealth tax – “A tax on those who are very, very well done can only pay a little more.”
Eventually, the judiciary admitted that cuts would be required, describing about $ 25 million. “The cuts would be very tiny in my opinion. You don’t have to cut to the bone, but you will have to make some cuts. “He didn’t say what that would be.
The Justice that spoke about Talkline today described these as relatively minor changes.
“We have increased consumer sales tax by one and a half percent. And the only other thing we’ve really done to the average, everyday person is that we said you pay a little more for sodas and you pay a little more for cigarettes – which we both need to cut down and we need to lose a lot.
“Of our natural resources, we only asked if you are when you are on the rise and doing absolutely great things and the profits are very, very, very high. We ask you to pay only a small fraction more. Our professionals have had to pay these taxes for a long, long, long time. Other than that, there is no pain. “
The governor concluded that the starting point for cutting income tax in half is simple. “The disadvantage is zero.”
Ryan Maness, a senior tax analyst at MultiState Associates, a state and local government relations firm, agreed that such a big change in tax policy is unlikely to be that easy.
“All policies have trade-offs and increasing the sales / taxation of professional services is no small thing as it seems to imply,” replied Maness to the governor’s comments.
He followed to describe unintended consequences.
“These taxes can put a heavy burden on businesses, often leading to rising prices for consumers, and most economists and public finance experts agree that taxing professional services (which the governor proclaimed) is a bad policy,” said Maness.
“West Virginia is not the first state to take this path, and every other state that has tried has failed: They tried it in Utah in 2019/2020 and it was so unpopular that there were massive protests and the longest serving senator lost his primary. “That was Senator Lyle Hillard of the US state of Utah, who sponsored the tax plan, which was overturned after a grassroots referendum.
All guidelines have tradeoffs and increasing the sales tax / taxation of professional services is not as small a thing as it seems to imply.
– Ryan Maness (@RyanLManess) February 11, 2021
It is really important for West Virgins to see the proposal as soon as possible and have time to speak to their lawmakers about how it will affect them, said Kelly Allen, executive director of the West Virginia Center on Budget & Policy.
“Governor Justice said last night that there was no downside, and that just can’t be true. There are winners and losers in any public policy decision, and raising sales tax while lowering income tax generally falls to people on low and middle incomes, “Allen said.
The judiciary and other proponents of the plan have cited the abolition of income tax as a tool to stimulate population growth. Senate President Craig Blair, R-Berkeley, outlined the goal of increasing West Virginia’s population by more than 400,000 over the next decade.
Justice described the guidelines of Senate Finance Chairman Eric Tarr, R-Putnam, in the Talkline interview.
In his own interview, Tarr also suggested that the income tax cut could lead to population growth and economic improvements.
“It would make us the state with no income tax,” said Tarr. Regarding West Virginia’s proximity to eastern population centers, he said, “This will be the state of states that have no income tax.”
Tarr suggested that increased flexibility in the workplace, such as being able to work from home, could make West Virginia an increasingly popular place to move. “We’re going to be draining Baltimore and DC Period,” said Tarr.
Part of the justice plan is to keep budgets flat over the next few years. Tarr agreed with this approach. “Here you could see the government starting to shrink a bit,” said Tarr. “When you have a budget, you need to figure out how to improve efficiency.”
Tarr suggested that the quality of government services for West Virginians would hardly change even with lump-sum financing. He said that reluctant spending in recent years has proven this point. “We are still able to provide the same level of service with the government,” said Tarr.
@ EricJTarr4WV speaks to @HoppyKercheval about whether or not he supports Governor Justice’s idea to cut half the state income tax. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/as1qq42hsO
– MetroNews (@WVMetroNews) February 11, 2021
It’s a $ 2.1 billion decision, but the governor says West Virginia might as well try.
“We have an opportunity here that we have never had here in West Virginia,” Justice said. “If we pass this on, we are ashamed.”