Tomblin Proposes Tax Hikes to Balance 2016, 2017 Budgets

Gov. Earl Ray Tomblin gave his final state of the state address before a Joint Session of the West Virginia Legislature last night. Tomblin spent most of his speech highlighting administrative successes of the past year and previewing some minor pieces of legislation he will ask lawmakers to consider this year.

But, while it was brief, it’s the governor’s budget proposal that’s receiving the most attention from members of the Legislature. The Democratic Governor is asking a Republican Legislature to increase taxes in order to balance not just next year’s budget, but to dig the state out of its current multi-million dollar hole. 

“As we work to find new ways to ensure our tax base is both stable and more diverse, we must also seriously consider new revenue opportunities,” Tomblin said during the 50-minute address. 

Credit Perry Bennett / West Virginia Legislative Photography

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West Virginia Legislative Photography

In an earlier press briefing, Tomblin’s budget staff discussed how the governor intends to fill the $381 million dollar budget gap the state faces by the end of the 2016 fiscal year in June and balance the 2017 budget. His plan includes four major points. 

1. Tomblin has submitted four supplemental appropriations bills to lawmakers for consideration, but says the bills must be passed by January in order to address the 2016 budget crisis. The bills, for the most part, pull one time monies from various accounts and nearly $52 million from West Virginia’s Rainy Day Fund.
2. Tomblin will present lawmakers with a bill to repeal the state behavioral health tax, a tax paid by individuals and institutions that provide behavioral health services. The governor is proposing replacing the $15 million tax by expanding the state’s durable medical equipment sales tax, but only for medical institutions, leaving individuals who purchase these products for use in-home exempt. Executive budget staffers expect the proposal to be revenue neutral.
3. The governor is proposing a tobacco tax increase that will for the first time include e-cigarettes. The bill would increase the cigarette tax by 45 cents to $1 per pack, all other tobacco products would raise from a 7 to a 12 percent tax, and the liquid used in e-cigarettes would be taxed at 7.5 cents per milliliter. If imposed by April 1, 2016, as Tomblin is suggesting, the tax would bring in $18.9 million in revenues for the 2016 budget and $78 million each year after. Tomblin has proposed dedicating $43 million in revenue from the tax to help fund PEIA, preventing benefit cuts for state employees. 
4. Tomblin will ask lawmakers to impose a telecommunications tax for the first time, something his staff says 41 other states have already implemented. In the most basic sense, the measure expands the state’s 6 percent sales tax to land line and cell phone bills. The Governor’s Office predicts the tax could bring in $10 million for the 2016 budget if imposed by April 1 and an additional $60 million annually.

Tomblin is also proposing lawmakers make changes to funds that currently are dedicated to paying of the state’s workers compensation debt. 
Revenue Sec. Bob Kiss predicts the state will have paid off its decades old debt by October or November of 2016, years earlier than anticipated. Because of that timeline, Tomblin will ask lawmakers to repeal the workers compensation severance tax, a 56 cents per ton tax on coal and a 4.7 cent per mcf tax on natural gas. 

The taxes themselves will expire once the debt is paid, but by changing the code now, Tomblin said lawmakers will be able to free the struggling energy industries of the burden months in advance. 

Credit Perry Bennett / West Virginia Legislative Photography

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West Virginia Legislative Photography

  To the proposed tax increases, House Speaker Tim Armstead is adamant West Virginia lawmakers will continue to look for places to cut government spending before they approve any tax hikes. 

“It appears to me that this budget and these proposals from the governor are basically asking the people of West Virginia to step in and take more of their hard-earned money and solve some of these issues,” he said after receiving the governor’s proposal.  

“I think the people of West Virginia are asking us to tighten our belt first and to look at ways we can make this budget more efficient where we can cut spending rather than saying we just want to run out and raise more taxes to keep the budget the way it was.”

Across the rotunda, however, Senate Finance Chair Mike Hall said he was relieved to hear Gov. Tomblin discuss revenue-generating measures, although he does not believe his chamber will back a telecommunications tax.