House Standing Its Ground on Tax Reform in New Bill

May 20, 2017

Members of the House are standing their ground when it comes to tax reform. At least, that’s what House Speaker Tim Armstead said Friday after a vote in the chamber on its own version of a revenue bill.

The bill does not include any of the changes to the personal income tax Senate Republicans and Gov. Jim Justice have agreed to, but Armstead said that doesn’t mean his chamber isn’t still willing to work on a compromise.

House Majority Leader Daryl Cowles, left, speaks with Del. Brent Boggs before Friday's floor session.
Credit Perry Bennett / West Virginia Legislative Photography

Members of the House voted 74 to 17 in favor of the tax bill negotiated between House Democrats and Republicans.

It brings in an estimated $100 million in additional revenue to close a budget gap in the 2018 fiscal year, which isn’t enough according to members of the chamber, but is a start. 

“You have to remember this isn’t in a vacuum and this isn’t the final step. We are still dealing with a budget gap, a less-than-cooperative Senate, some major cuts that still face us,” House Majority leader Daryl Cowles said Friday.

Cowles was defending one provision of the bill in particular, a three-year phase-out of the income tax assessed on Social Security benefits for individuals making less than $100,000 a year.

The bill would also exempt military retirement pay from the tax, and increases the standard deduction from $2,000 to $2,500 – again, for individuals making less than $100,000 a year.

House leaders on both sides of the aisle say that’s the kind of income tax reform they’re willing to go along with in this special session—provisions that benefit low-income and working West Virginians. 

“This House body, against the Senate, is looking after the overwhelming majority of the people of West Virginia. Not the wealthy. Not the well to do, which seems like the only concern that they have over there,” Democrat Isaac Sponaugle said Friday in a floor speech.

That Senate plan restructures the personal income tax, creating four new income brackets and lowering the overall rate by 15 percent in 2018. In exchange, the Senate plan would raise the consumer sales tax to 6.95 percent, something House Republicans have said they are not willing to do.

The House bill does make some changes to the consumer sales tax, though. It brings in additional revenue by getting rid of a number of exemptions, keeping the rate at 6 percent.

Under the House bill, cell phones, electronic data usage, gym memberships, primary opinion research, and purchases communications businesses make would be subject to the tax. Also, the cost of labor up to $40,000 on new construction would be taxed—a provision that was amended on the floor Friday. 

Del. Stephen Baldwin presented his amendment to offer some relief to flood victims Friday.
Credit Perry Bennett / West Virginia Legislative Photography

“You exclude folks who are rebuilding from natural disasters from paying the sales tax on construction labor,” Greenbrier County Democrat Stephen Baldwin explained. His amendment, also sponsored by Fayette County Republican Kayla Kessinger, was adopted by the chamber. 

Those natural disasters have to be declared emergencies by the state or federal government, but in the wake of the June 2016 flooding, Baldwin said victims deserve the relief. 

The House bill increases the amount of money dedicated to the historic rehabilitation tax credit—a credit offered to investors who restore historic buildings.

It also removes Justice’s provisions to restructure the coal severance tax, tiering the tax rate based on the price of coal per ton. The governor owns several coal mines in the state.

Armstead said the vote Friday should send a clear message to the governor and Senate Republicans—that members of the House are going to stand their ground when it comes to tax reform.

Senate Republicans have criticized Armstead for not backing a plan that cuts taxes for all West Virginians. Gov. Justice has also said his caucus has been blocking progress, but the Speaker said his caucus is now leading the way to a compromise.

“We want to work with the governor and we want to work with the Senate, but as you recall, the governor portrayed this as it was only the House Republicans that were standing in the way of what he wanted," Armstead said after the vote.

"We have now had the House Republicans, the House Democrats and the Senate Democrats that have sent this message,” he said.

Senate Democrats voted against the tax reform plan backed by the governor and Senate Republicans as an attempt, according to the Senate minority leader, to protect working West Virginians from a larger tax burden.

With the passage of their revenue bill, Armstead is sending his members home until Tuesday. That’s when they’ll return to likely begin the work of finding a compromise with the Senate, whose members return Monday morning.

Gov. Justice has yet to present either chamber with a budget bill for the 2018 fiscal year that begins July 1 and without adding it to the special session call, lawmakers cannot introduce a version of their own.