Justice, Manchin Squabble Over Coronavirus Relief Revenue Provision, Income Tax Reduction Plan

West Virginia Gov. Jim Justice took aim at U.S. Sen. Joe Manchin Monday over a provision in the $1.9 trillion coronavirus relief package moving through Congress that would keep states from using that funding to offset tax revenue losses due to changes in state law.

The squabble between the two politicians comes as Justice hopes to reduce the state’s personal income tax by 60 percent for all filers, which translates to more than $1 billion loss in state revenue. Under Justice’s plan, the state would also increase consumer sales taxes, as well as taxes on cigarettes, tobacco, beer, liquor, wine and other products.

But even with roughly $900 million in proposed tax hikes under Justice’s plan, the state would be about $185 million short in revenues, which is where the federal relief funds come into the equation.

In the federal relief package passed Saturday by the U.S. Senate — known as the American Rescue Plan Act of 2021 — one provision would prevent states from using the federal relief dollars to “either directly or indirectly offset any reduction in the net tax revenue” of a state caused by a change in law.

According to an earlier version of the American Rescue Plan that passed the U.S. House of Representatives, no such provision existed that would have prevented those funds from being used in such a way.

During Justice’s virtual briefing Monday, the governor was asked about this aspect of the bill and went as far as accusing Manchin of inserting that provision himself.

“This is absolutely terrible, but what was written in the law was written in there primarily by Joe Manchin,” Justice said. “Joe Manchin is supposed to be your representative, West Virginia. And you know what Joe Manchin is doing? He’s still trying to hit at me.”

Justice then accused Manchin of inserting that provision in the bill simply to keep the governor’s income tax reduction plan from moving forward.

“When it really boils right down to it — what Joe Manchin is parading around doing is — he’s basically telling West Virginians ‘You don’t want to do this and the reason you don’t want to do this is because Jim Justice came up with this,” Justice said.

On Monday, Manchin accused Justice of attacking him and said he welcomes a conversation with the governor on how to best improve the lives of residents using the more than $2 billion in funding secured for the state through the bill.

“Policy differences do not justify personal attacks; I want to work with Gov. Justice in the best interest of our state,” Manchin said in a statement.

A spokesperson for Manchin did not respond when directly asked whether the senator was responsible for the provision in the American Rescue Plan that would keep states from using the relief funds to backfill losses from tax cuts.

In recent weeks, Justice has floated the possibility of the federal government forgiving relief money that the state has allocated toward unemployment and other pandemic-related expenses not already covered by earlier relief packages.

If that were to happen, Justice has proposed setting aside any surpluses from that hypothetical forgiveness program into a “bucket” that he has said he hopes could be used to backfill any revenue shortfalls.

But on Monday, Justice clarified his position on the matter.

“My additional rainy day bucket has nothing — and still has nothing in the world — to do with taking CARES money and putting it over here in a rainy day bucket that is for tax relief. Nothing at all. Nothing whatsoever,” Justice said.

And so far, that remains true, according to an outline of Justice’s plan that was unveiled Thursday.

But Justice also questioned why states — including West Virginia — should not be allowed to use the money in any way they see fit.

“It is our right, as other states, to draw down stimulus money that’s been given to us to pay us back for expenditures that we have expended toward COVID,” Justice said. “If we have just happened to run our states better than other states — that are run by Democrats and out of control. If, in fact, we have done that, should we not have the options to do with those monies whatever we want to do with those monies that will only help West Virginians and help us become better and bring more opportunities to us?”

The governor’s office released a draft of his income tax reduction bill Thursday afternoon. As of Monday, the measure had not been formally introduced in either the House or Senate.