Senate Moving Forward with Tax Reform Despite Democratic Opposition

The Senate has approved a bill that would drastically restructure the state’s tax code in the hopes of balancing the budget for the upcoming fiscal year.

The plan has the support of Senate Republicans and Democratic Gov. Jim Justice, who switched parties before announcing his bid for the office. The bill is, however, losing its previous support from Democrats and will meet some serious opposition in the House.

Before the vote Tuesday, Justice himself addressed members of the chamber, asking for their support. 

“You’re going to have to vote yes,” he said. “We’re going to have to vote for a plan that we all think could be better.”

Justice gave an impromptu and brief speech, describing a new version of the plan negotiated between his office and Senate Republicans Tuesday, a version different from the one presented to the chamber when they returned to their special session Monday.

The bill would raise the consumer sales tax from 6 percent to 6.95 percent and in turn, restructure and reduce the personal income tax for all West Virginians, including proving a tax cut to the wealthiest citizens.

The revised bill also includes a half a percent increase to the corporate net income tax and restructures the coal severance tax, charging a rate based on the price of the commodity per ton.

On top of it all, Justice said, it provides the basis for a balanced budget in 2018. That budget bill, the governor says, will spend $4.34 billion compared to the $4.32 billion spent last year.

“Now how in the world could we not embrace this moment?” he said.

But not every member of the Senate the embraced moment when it came time to vote.

Democratic members of the chamber even attempted to amend it, removing any changes to the personal income tax and adding one simple provision- an income tax exemption for Social Security benefits. 

Senate Minority Leader Roman Prezioso offered the amendment on behalf of his caucus, saying the change offers relief to what he says are the most vulnerable West Virginians—senior citizens on a fixed income.

Several Republican members of the body argued only seniors who have additional income have to pay taxes on social security benefits anyway, and that a blanket exemption benefited even the wealthiest seniors, while the bill’s income tax restructuring provides a tax cut for all West Virginians.

But Prezioso argued the Democratic backed change was about more than just fighting for seniors. It’s also about getting a bill that members of the House will agree to.

“If we continue to do things the way we’ve done in the past, make the same mistakes, sending the same bill over, why do we expect different results?” he said. “If we send this bill over we’ve been told that they’re going to not accept our proposal for the income tax, that’s a nonstarter. So, this gives them an option.”

The amendment failed, and members of the Senate approved the revised bill on a 19 to 11 party line vote.

“The majority rules,” Senate President Mitch Carmichael said after the vote.

He is confident the plan will create economic growth in the state, but was quick to point out that with the exception of one member, Democrats had flipped their position on the bill in less than two weeks.

In the House, Republican leaders have expressed a list of issues with the plan. The first, that changes to the income tax only allow for a balanced budget for a year or maybe two, but result in much larger deficits down the road, putting lawmakers in the same position.

The second, that a hike to the consumer sales tax—a hike of almost one percent in the latest version of the bill—will push consumers in border regions out of state to make purchases.

The increase to the corporate net income tax was previously removed from the bill because of House concerns, but was reinstated Tuesday. 

“The House has frequently said what they’re opposed to,” Carmichael said. “They’ve rarely said what they’re for.”

What they are for, however, will likely become clear soon, possibly as early as Wednesday.

The chamber will have possession of the newly minted Tax Reform Act of 2017 and members of the House Finance Committee are scheduled to take up a taxation bill of their own Wednesday morning.

In the Senate, Carmichael said his chamber will put a budget bill based on the tax plan to a vote as soon as they receive it from the Governor’s Office. He said his chamber will not wait for the House’s vote on the tax bill before approving a budget.