Senate Set to Vote on Tax Reform Plan…Again

Members of the Senate’s Finance Committee were presented with some hard numbers Tuesday about the impacts their tax reform plan will have on the overall state budget.

The chamber has presented and voted on similar plans over the last several months, and, even with a clear message from the House that Delegates won’t support the measure, the upper chamber will likely vote on an almost identical bill again Wednesday. 

The Tax Reform Act of 2017’s main purpose is to set into motion an eventual repeal of the personal income tax. In January 2018, the bill would create four new income tax brackets that would be taxed at a 15 percent overall lower rate, a rate which would then be reduced by another 5 percent in January 2019.

In order to make up for lost revenue, the bill increases the consumer sales tax starting July 1 of this year from its current 6 to 7.25 percent and gets rid of a number of exemptions, charging the tax on things like cell phone bills and gym memberships.

Deputy Revenue Secretary Mark Muchow said in committee the plan would result in $147 million in new revenue for the 2018 fiscal year, but after that, would begin to result in deficits, creating a $56 million hole in 2019 that would grow to as large as $178 million in 2022. That is unless there is significant economic growth in the state to offset it.

But Senate Democrats don’t believe in the plan.

“We like the bill from the House a whole lot better,” Senate Minority Leader Roman Prezioso said Tuesday.

Credit Perry Bennett / West Virginia Legislative Photography

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West Virginia Legislative Photography

“We don’t see the income growth growing at the pace that’s going to be needed to backfill that deficit and what we’re afraid of is we’re going to put us in a position then– if you’re in an election year– nobody is going to want to raise taxes,” Prezioso said. “So you’re going to have to end up cutting higher education, DHHR, and public ed.”

He and members of his caucus attempted to amend the Senate plan in committee Tuesday, returning to the House version, but were unsuccessful.

The House bill that was approved Friday does not make changes to the personal income tax, except to provide exemptions for some Social Security and military retirement pay. Instead, it focuses on getting rid of exemptions under the sales tax to increase revenue.

It’s a plan House Speaker Tim Armstead said his caucus isn’t going to back away from.

“We really want a solution, we just don’t want the solution to be one that has been rejected time and time again,” Armstead said. “We have voted down the Senate plan twice in the House, not simply said we don’t like it. We have voted it down twice.”

“We put forward our own plan as an alternative. What more do we have to do to send that message?”

So, when the Senate likely puts the bill to a vote Wednesday, Armstead said it will end up in a conference committee where members of each chamber can work out their differences. 

“I think it’s to their advantage,” Prezioso said of the conference committee process, speaking of the House. “Obviously, they’ve got some sentiment from House Democrats and from Senate Democrats so now they’re gaining some allies.”

“So if we can get the coalition together and work out a plan that we can embrace, I think we can get out of here with minimal damage.”

Armstead said there have been no formal negotiations between House Republicans and legislators the Democratic Party.