Tag: Personal Income Tax

W.Va. Revenue Secretary Explains Tax Cut Proposal

Next week, in a special session called by the governor, the state legislature will look at reducing the state’s personal income tax by 10 percent overall with people in the lower rates getting slightly higher percentages.

Next week, in a special session called by Gov. Jim Justice, the West Virginia Legislature will look at reducing the state’s personal income tax by 10 percent overall with people in the lower rates getting slightly higher percentages.

News Director Eric Douglas spoke with Cabinet Secretary for the Department of Revenue Dave Hardy to get an understanding of what the cuts would mean to the state and the average person.

He explained that if you made $1 million, your reduction would be 8 percent. But at the lower level, your first $10,000 of taxable income receives a 33 percent reduction. If you make $20,000, you receive a 19 percent reduction and a 14 percent reduction for $30,000. Taxpayers won’t see 10 percent exactly until $60,000.

For a person making $50,000 a year, that means an 11 percent cut and about $240 in tax savings.

This interview has been lightly edited for clarity.

Douglas: I believe the governor said this is effectively about a $250 million a year cut. 

Hardy: $254 million to be exact.

Douglas: So that’s a $254 million reduction in revenue. Where’s that money coming from?

Hardy: It’s a $254 million reduction from record breaking revenue. We had a $1.3 billion plus surplus in the fiscal year that we just finished. Our revenue growth was $1.1 billion in a 12-month period. To put that in perspective for you, that’s more than the state’s rainy day fund, and the rainy day fund took 30 years to build.

So in one year, our revenue grew in excess of the entire state rainy day fund. But we are under the ARPA guidelines — American Rescue Plan Act guidelines — that limit how many tax cuts or what type of tax cuts you can make until the end of 2024. So we did a calculation. And we recommended to the governor that $250 million roughly was the most that we felt like we could cut and return to West Virginians’ pockets.

Douglas: Those ARPA guidelines were put in place so state legislatures didn’t use the federal money to start making tax deductions. 

Hardy: Well, yes, they were put there, because the way ARPA is set up, you have to grow a certain amount each year, to even be able to consider a tax cut. Well, we exceeded the growth rate spelled out in ARPA. So we were able to return part of this tax cut, or the revenue to the West Virginians.

Let me tell you, it wasn’t just federal money or anything to do with federal money that made us have such a remarkable year. Our severance tax revenues this year were 180 percent. So we had a record breaking year. And when I say a record, I mean a record by $300 or $400 million in excess. Natural gas in West Virginia is doing very well right now. And the metallurgical coal market has also increased substantially.

Douglas: So how confident are you that this will continue? If you’re making a $254 million reduction in revenue, what if five years from now we’re not bringing in those kinds of numbers, and then we’re in a hole?

Hardy: I’m confident that we can take the $254 million cut and still be healthy going forward. Again, it sounds like a tremendously large number, but when you put it in perspective of the state’s budget, the state’s general revenue this year was $6 billion. It’s $254 million out of $6 billion. And ARPA guidelines restricted us on how far we could go. But we thought it was a very safe cut to make, or we wouldn’t have recommended it to the governor.

Douglas: The governor and the legislature have been talking about reducing this and completely doing away with the personal income tax, which I’m guessing that’s about $2.5 billion.

Hardy: About $2.6 billion.

Douglas: I’m guessing you’re not anticipating that happening anytime soon.

Hardy: We go through the state’s finances month by month, and quarter by quarter and year by year. I wouldn’t anticipate making a decision on that today. I do know the governor’s number one goal is to phase out the state income tax in West Virginia. He feels like if West Virginia would do that, that we would have a much greater potential for population growth and attract people to move to our state.

Douglas: What do you anticipate happening next year? How do you expect this to affect the state?

Hardy: I think the state is going to have a very healthy fiscal year next year. I think the severance tax is going to continue to do very well. And I think West Virginia’s economy is doing well. Right now we have a record low unemployment rate. And so I think we’ll do well next year. And I think we can have a healthy budget. The West Virginia Legislature and the governor, particularly the governor, because he’s the one that proposes the budget, have kept our state budget very tightly constrained over the last five years.

If you look at our budget from 2017, and look at our budget today, I’m not going to call it a flat budget, but it has been very, very limited in growth. And mainly the only growth in the spending side has been the governor’s bill to give state employees deserved pay raises. So you look at the revenue side, but you also have to look very carefully at how tightly the expense side has been controlled by the governor and the budgets that he’s proposed to the legislature.

Douglas: So what’s the average citizen going to see?

Hardy: Here’s how it’ll work. The state tax department will issue new withholding tables, which means that during the second half of 2022, you will have less money withheld out of your paycheck. Because the state tax rates have gone down, if you are an estimate payer, and a lot of people are, they pay estimates on Sept. 15 and then they pay the next one on Jan. 15. You can adjust your estimated payments down. Then next spring, when you file your tax return in the spring of 2023, you’ll get a much larger refund. So you’ll see it in three different ways because the first six months of this year, you’ve paid under the old tax tables.

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The state legislature will look at the question in a special session on Monday. A statement from the Democratic leadership in the legislature indicated enthusiasm for the discussion as a way to reduce the burden on working West Virginians in light of inflation.

“West Virginians need help now,” Senate Minority Leader Stephen Baldwin, D-Greenbrier, said. “As inflation has grown this year, Democrats have proposed ideas to provide the people with relief now — gas tax relief, sales tax relief, tax credits for families, workforce investments and even a tax rebate.”

House Minority Leader Doug Skaff, D-Kanawha, agreed.

“The governor announced this plan without discussion with or input from legislators — and we are the ones who have been hearing from people across the state on what would help them the most,” Skaff said. “The limited special session call also precludes us from discussing other avenues for meaningful tax relief for West Virginians. His lack of communication aside, we look forward to reviewing this plan to see how we can provide much-needed relief to the citizens of our state.”

See the proposed legislation.

See the existing tax code. Scroll down to section 4E.

Governor Calls Legislative Special Session For Proposed Personal Income Tax Cut

Gov. Jim Justice has called a special session of the state legislature for Monday, July 25.The special session call contains one item: the governor’s proposal to reduce West Virginia’s personal income tax.

Gov. Jim Justice has called a special session of the state legislature for Monday, July 25.

The special session call contains one item: the governor’s proposal to reduce West Virginia’s personal income tax.

Under the proposal, an aggregate 10 percent tax cut would be retroactive back to January 1, 2022.

The full text of the proposed legislation can be read here.

In a press release announcing the special session, Justice reiterated his desire to completely eliminate the state’s personal income tax, and said the proposed cut would “get the ball rolling.”

Justice and proponents of personal income tax reduction in the legislature have categorized the state’s personal income tax as a burden they hope to lift from West Virginians, enticing new residents to relocate to the state in the bargain. They cite states like Florida, Texas and Tennessee as examples of growth and immigration without the imposition of a personal income tax.

A prior attempt to reduce the personal income tax during the legislature’s 2021 regular session failed after the House rejected a Senate proposal to raise other taxes to balance the state budget. Under this proposal, there are no proposed tax increases to offset the losses, estimated to be $250 million annually.

W.Va. House Kills Personal Income Tax Reduction After Prodding From Gov. Justice

Updated Friday, April 9, 2021 at 5:05 p.m.

The West Virginia House of Delegates swiftly and overwhelmingly killed a proposal that would have reduced personal income taxes but called for hikes on other revenue streams.

The House took action to reject the bill after Gov. Jim Justice expressed his disappointment over the lower chamber’s inaction on the issue that failed to garner legislative consensus.

After holding out on receiving the message on the measure’s Wednesday passage in the Senate, the House voted Friday afternoon to unanimously reject House Bill 3300. Republican leaders took up the bill that had passed the Senate late Wednesday.

The latest plan from the Senate became the focus after the governor held a Monday meeting with top lawmakers in an attempt to gain consensus on the issue. The upper chamber based its proposal, at least in part, on an updated set of ideas from Justice.

The Senate’s final version would have reduced the personal income tax and would have offered tax rebates to low-income earners — but would have done so through increases to the consumer sales tax, a tiered system on severance taxes and hikes to the cigarette tax.

An earlier plan passed by the House differed dramatically from the Senate’s version and offered no new sources of revenue to balance the state budget. House Finance Chair Eric Householder, R-Berkeley, said the Senate’s tax increases and new revenue streams were the deciding factors for the lower chamber.

“We showed them the easy way out,” Householder said. “West Virginians want real tax relief and no new taxes. So why in the world do we want to penalize our small businesses, as they are the lifeblood of our economy? And why do we want to place new burdens on our own citizens?”

Del. Marty Gearheart, R-Mercer, also chimed in and called on fellow lawmakers to reject the Senate’s proposal.

“To quote our governor, ‘There is no way shape, form or fashion’ that I can ever support any portion of what is suggested,” Gerheart said. “Ladies and gentlemen, it is time for us to let the governor and the Senate know that we recognize that tax increases are not a tax cut. They are simply a shifting of burden.”

Hours earlier during a virtual news briefing, Justice suggested delegates take a vote on the proposal the governor had backed emphatically throughout the course of the 2021 session.

“They’re not gonna vote on it, because they’re afraid to vote on it. Because certain people go on record as saying that they aren’t even going to vote on the most important thing that this state has ever, ever had in front of it,” Justice said.

The governor and members of the Republican-led Senate had promoted the reduction of the personal income tax as a means to not only stave off the state’s population decline, but also attract hundreds of thousands of new residents — especially in light of the state’s newfound attention for its pandemic response.

“West Virginia is a great place to work remotely. We are investing in broadband and roads right today. We have led the nation in our COVID response,” Justice said. “People are realizing West Virginia is a safe, beautiful place to live. Now’s our moment.”

Following the House’s rejection of the measure, House Speaker Roger Hanshaw, R-Clay, told reporters he and his members aren’t opposed to reducing the personal income tax. But, Hanshaw said, it would have been “reckless” to vote for the Senate’s plan.

“We were never going to get this done in 60 days. We didn’t get a plan until well into the regular session — and there is nothing wrong with that,” Hanshaw said. “But big, transformative, monumental policy changes take time to craft.”

During Justice’s news conference, he suggested that he would continue to tout the idea through a “roadshow” in which he would educate residents on the issue.

The West Virginia Legislature’s 60-day regular session ends Saturday at midnight.

West Virginia Senate Passes Personal Income Tax Reduction, Budget

In a Wednesday evening floor session that stretched for more than three hours — and became at times fiery between members of the Republican majority and Democratic minority — members of the West Virginia Senate passed a measure calling for the reduction of the personal income tax and a budget bill.

Following Gov. Jim Justice holding a summit Monday with top legislators of both parties, Sen. Eric Tarr, R-Putnam, offered an amendment Wednesday to House Bill 3300 — a marquee proposal this session that calls for a reduction in the personal income tax.

Under Tarr’s amendment, the state income tax would be reduced over the course of years and tax rebates would be offered to low-wage earners (ranging from a $250 rebate for those making $10,000 or less to a $50 rebate for those making between $30,000 and $34,999).

The initial loss of revenue under the bill, which would go into effect Jan. 1, 2022, would be $818 million in the first year.

That loss of revenue would be offset by hikes to the consumer sales tax (which would jump from 6 percent to 8 percent), cigarettes (which would go up from $1.20 to $2.20 per pack) and a tiered severance tax system for coal, oil and gas. A new sales tax on professional services would also be included.

The bill would establish a fund that would take in revenues from some of the newly created streams, including increases on cigarettes and tiered severance taxes.

After the fund — dubbed the SAFER Fund by the Senate Finance Committee — hits $100 million, $50 million would be released to spur on additional income tax cuts.

“The reason this path was chosen is because the No. 1 problem that affects this state is loss of population,” Tarr said about the latest plan to reduce the personal income tax.

Democrats argued they had little time to review Tarr’s amendment to the measure.

“It was mentioned there [were] negotiations with 134 people. Well, make it 133 — because I was sure not invited,” said Sen. Mike Caputo, D-Marion.

“I looked at my crystal ball. You’re going to have 18 votes. But I’m not sure that’s what’s right for West Virginia,” Caputo said later.

Members of the minority, including Sen. John Unger, D-Jefferson, attempted unsuccessfully to table the bill until it had a fiscal note attached, as is required under Senate rules.

“You’re not going to hide from the people of West Virginia about the fiscal impact,” said Unger, after having his challenge overruled by Senate President Craig Blair, R-Berkeley.

House Bill 3300 cleared the upper chamber on the most narrow of margins — an 18-16 vote — with Sen. Bill Hamilton, R-Upshur, Sen. Patrick Martin, R-Lewis, Eric Nelson, R-Kanawha, Sen. Rupie Phillips, R-Logan and Sen. David Stover, R-Wyoming, voting against the measure.

Programs, Agencies Largely Restored In Budget Amendments

Following the passage of House Bill 3300, lawmakers took up Senate Bill 125, the upper chamber’s version of the budget bill. The funding measure remains mostly flat compared to the current fiscal year, but includes a 1.5 percent reduction for almost all agencies and programs.

Lawmakers considered a series of amendments that would restore funding to a host of agencies and programs that had been cut in the Senate Finance Committee’s version of the budget.

A slew of amendments offered by Democrats — which sought to reinstate funding for the state broadband office, the Library Commission and other programs — were rejected.

An amendment from Tarr and Senate Judiciary Chair Charles Trump, R-Morgan, reinstated $3.78 million of funding to the Educational Broadcasting Authority — the agency that oversees West Virginia Public Broadcasting. The agency’s current allocation of $3.83 million had earlier been zeroed out by the Senate Finance Committee.

The amendment from Tarr and Trump also allocated end-of-the-year surpluses to reinstate proposed cuts to Marshall University and West Virginia University, which had previously been slashed by millions each.

The change to funding for the Educational Broadcasting Authority, Marshall and WVU was adopted on a 30-4 vote, with Sen. Mike Azinger, R-Wood, Sen. Robert Karnes, R-Randolph, Sen. Patrick Martin, R-Lewis, and Sen. Randy Smith, R-Tucker voting in opposition.

Senators also adopted on a voice vote an amendment from Sen. Robert Plymale, D-Wayne, that added $50 million to the state’s broadband enhancement fund.

After settling on a final version of Senate Bill 125, senators placed that measure into House Bill 2022 before voting 24-10, with Plymale joining the majority, to send the budget bill back to the lower chamber.

The House will now consider the current version of the budget bill and the Senate’s latest set of ideas to reduce the personal income tax. The 60-day legislative session ends Saturday, April 10, at midnight.

Gov. Justice Unveils Yet Another Personal Income Tax Reduction Plan, But Progress On Issue Remains Elusive

On Day 55 of the West Virginia Legislature’s 60-day session, Gov. Jim Justice gathered top lawmakers of both parties to try to hash out the differences between three very different plans to reduce the personal income tax. Instead, the governor offered up another version of his plan before lawmakers chimed in — and consensus on the issue remained elusive.

Billed as a way to urge lawmakers to agree on what has been, to date, a stalemate, the governor’s “summit” began with Justice critiquing the plans put forth by the Republican-led House and Senate.

“I do not agree with the House plan from the standpoint that it takes a long, long time,” Justice said of House Bill 3300, as passed by the lower chamber last month.

Under that plan, the personal income tax reduction would take place over the course of roughly 12 years and would reduce revenue by at least $150 million year over year — totaling more than $2 billion in lost revenue upon full implementation. The proposal from the House offers no new sources of revenue.

Justice said the House plan would not effectively entice people to move to West Virginia — one of his stated motivations in reducing the personal income tax.

“I think from the Senate side, they went big enough,” Justice said, noting, however, that he sees certain tax hikes as burdening the wrong parts of the population.

A strike-and-insert amendment to House Bill 3300 — adopted by the Senate Finance Committee and slated for a vote in the full Senate with amendments pending Tuesday — differs greatly from the House plan, but also departs from Justice’s proposal that was announced last month.

Under the upper chamber’s plan, there would be increases to the consumer sales tax from 6 percent to 8.5 percent, the reinstatement of the food tax at 2.5 percent and a new hotel occupancy fee, among other revenue increases.

“My plan did just this — it tried to make every single living, breathing West Virginian cash-positive,” Justice said, arguing that his original plan took on what he called the “Charleston swamp.”

But those words from Justice, as he acknowledged disapproval from some business groups and lobbyists, served as a pivot. Justice then unveiled a brand new set of ideas on tax reform — with some aspects of his original plan remaining intact and others dramatically changed.

After passing out literature to lawmakers on the stage, the governor announced a new proposal he called the “Justice 4 All” income tax plan. He then explained the latest iteration of his plan, moving the personal income tax reduction down to 50 percent (it was a 60-percent reduction in his original plan).

Under Justice’s new plan, the consumer sales tax would still jump from 6 percent to 7.9 percent. Proposed increases to beer, liquor and wine that were included in Justice’s original plan would be eliminated, the governor said.

After the governor introduced his new plan, lawmakers began to speak up and offer their own thoughts on the various proposals.

“One of the principal concerns that the members of the House always debate at length is how any proposed plan would differentiate West Virginia from neighboring states specifically as it relates to the border-county issue,” said House Speaker Roger Hanshaw, R-Clay.

After a somewhat extended back and forth with Justice about concerns over border

counties, Senate President Craig Blair, R-Berkeley, said he would get behind the governor’s new plan.

“I’d vote for this in a heartbeat — and I do believe what you’ve got here is an improvement,” Blair said about Justice’s latest set of ideas.

“Are we prepared to do this today? No,” said Blair, signaling his eagerness to find compromise. “But maybe tomorrow. The sooner the better.”

Senate Finance Chairman Eric Tarr, R-Putnam, questioned why the governor’s plan had focused on taxes on coal and gas, when he sees President Joe Biden’s proposed policies on natural resources as a potential hindrance.

“There is concern within the Senate of using volatile and less predictable taxes to offset a reduction in a very stable revenue source,” Tarr said, noting that the Senate plan didn’t consider severance taxes on natural resources.

Justice responded by saying that his plan didn’t hinge on severance taxes as much as it does economic growth. The governor took issue with the Senate’s plan to reinstate things like the food tax.

“The biggest thing that I think the Senate plan will be a tremendous obstacle is just this — like it or not like it — it puts an incredible burden back on those that are struggling the most. They’re going to perceive it that way,” Justice responded.

House Finance Chairman Eric Householder, R-Berkeley, said he was giving the governor “the way out” with the plan that has already passed the lower chamber.

“The House, right now, has the common-sense approach — a moderate approach — that doesn’t wreck the West Virginia economy,” Householder said. “And it burdens no one. Yes, it may take 12 years. But I think it’s a more common-sense approach.”

It was nearly an hour and a half into Monday’s summit before Justice heard from Democrats — whose small numbers in the House and Senate have been able to offer little influence on legislation this session.

House Minority Leader Stephen Baldwin, D-Greenbrier, applauded Justice for bringing members of the two parties together — and for championing the tax rebates for low-wage earners included in the both of the governor’s plans, including the new “Justice 4 All” proposal.

Baldwin also asked Justice what cuts to the state budget might be included under the new plan, including $25 million of funding to programs that have not yet been identified.

“I heard you talk about the potential cuts over time in the House plan,” Baldwin said. “We’ve obviously seen what the potential cuts are — in terms of the Senate plan for the budget moving forward — which I think are some pretty important things to you. So what might those look like?”

Justice said he had met with Tarr about potential cuts that would reel back wasteful spending, that the governor said would be “easy.”

“Now, I don’t really know what they are. And, you know, we’ll have to all look at that and see what they are,” he said.

House Minority Leader Doug Skaff, D-Kanawha, also thanked Justice for the opportunity to speak at the summit, and said he is open to the idea of reducing the personal income tax. However, Skaff said things felt too rushed and he made it clear that consensus wasn’t there yet.

“I question the sense of urgency today that we have to hurry up and do this. I’d be all for us meeting numerous times, through the next few months through the whole summer,” Skaff said. “Let’s get this right. Let’s do it right, let’s take part of the Senate’s plan, part of the House plan, your plan — let’s get this right.”

“I know we’ve only got five days left — and we can talk about this for 500 years,” Justice said in closing out the two-hour summit. “But it takes a lot of effort from everybody. I have given you every single thing in my soul to try to get us across the finish line.”

West Virginia House Approves Personal Income Tax Reduction Plan, Potential Revenue Losses Flung Into Question

The West Virginia House of Delegates has passed a bill that would reduce the personal income tax each year until it is fully eliminated. The measure would equate to at least a $150 million annual loss in revenue and would ultimately cost the state more than $2 billion each year upon full implementation.

Lawmakers in the lower chamber voted 77-23 mostly along party lines Monday to send House Bill 3300 to the Senate, which could make changes to the measure. The passage of the measure comes as Gov. Jim Justice continues to push his own plan despite opposition from business groups and some lawmakers.

Originating in the House Finance Committee last week, House Bill 3300 offers no tax increases to recoup revenue losses anticipated each year under the proposal.

The bill would also create a “personal income tax reduction fund” that would pull dollars from other sources, including the lottery. That fund would speed up the reduction of income taxes until it would be fully eliminated. According to an analysis from the West Virginia Center on Budget and Policy, the personal income tax would be completely eliminated by 2030.

House Minority Leader Doug Skaff, D-Kanawha, expressed concern over the possibility of massive cuts to state government in the future. Skaff argued the Legislature should take more time in considering the plan outlined in House Bill 3300.

“We all want to reduce the personal income tax. But why do we have to do it today on Day 48?” Skaff said. “Let’s kick this thing into the summer. Let’s study it over interims and put a bipartisan work group together. Let’s do it right, let’s do it responsibly, let’s not handcuff and strap the hands of the future legislatures and legislators for years to come.”

But House Finance Chair Eric Householder, R-Berkeley, touted the plan, arguing that residents would continue to benefit over the course of years.

“This is a new green deal for West Virginia. Not the one you’re thinking of, but a true green deal that puts money in your pockets,” said House Finance Chairman Eric Householder, R-Berkeley.

Sean O’Leary of the West Virginia Center on Budget and Policy told West Virginia Public Broadcasting last week that the state budget may be able to afford the first year of lost revenues under House Bill 3300, but subsequent years would likely come at a cost to state agencies and programs.

“No one said one word about how we’re going to pay for this $150 million a year. It’s got to come from somewhere,” O’Leary said.

O’Leary noted rising costs to Medicaid and PEIA as well as new legislation that allows for education savings accounts — which will come at a $126 million price tag per year — as other reasons to tread carefully.

“We’ve got to pay for these things. And we’re going to get rid of $2 billion in just a handful years. No one’s answered that question [about how we pay for this tax reduction],” he said.

On the House floor Monday, lawmakers adopted one amendment from Householder that would delay funds being transferred to the personal income tax reduction fund until July 2022 instead of Jan. 2022.

Delegates also rejected two amendments to House Bill 3300.

The first, from Del. Mick Bates, D-Raleigh, sought to use hypothetical revenues from adult-use cannabis for the personal income tax reduction fund. Bates’ amendment was rejected on a 29-71 vote.

Another amendment from some Democrats, including Del. John Doyle, D-Jefferson, sought to strike out the entirety of House Bill 3300 and simply offer a $150 tax deduction to all filers — was also rejected on a 23-77 vote.

With Wednesday being Day 50 of the legislative session and known as “Crossover Day” — a deadline for bills to come out of their chamber of origin — House Bill 3300 has been seen by some as a placeholder to continue the conversation on reducing the personal income tax.

The bill was offered as an alternative to the governor’s plan — which Justice continues to promote despite a lack of buy-in from the House — that would reduce the personal income tax for all filers by 60 percent, but also calls for hikes to taxes on consumer sales, tobacco, alcohol and soda, among other increases.

Jared Walczak, vice president of state projects at The Tax Foundation, said proposals like reducing the personal income tax are always a negotiation — between political parties, different legislative bodies and the governor.

Walczak said because of that, any bill that makes it to the finish line is likely to look different than what we’ve seen so far.

“We’re seeing that here, the governor has his proposal, the House has a proposal, there are senators who have different ideas about this,” Walczak said. “If there is going to be any significant reform package, it will undoubtedly borrow elements from each of these proposals, you wouldn’t expect one to get through without change.”

Ahead of the session, Senate President Craig Blair, R-Berkeley, touted the idea of reducing the personal income tax. He and other leaders in the Senate have yet to reveal their position on the issue, stating they want to have a look at what has been sent over to them from the House.

The West Virginia Legislature’s 60-Day regular session ends Saturday, April 10 at midnight.

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