Republican West Virginia Gov. Jim Justice called Wednesday for cutting the state’s personal income tax in his State of the State address, and he also proposed tax increases on the wealthy and on the sale of soda and tobacco.
Justice outlined his plan for cutting the income tax in half for most earners in his fifth address at the state Capitol. Lawmakers opened a 60-day session at the statehouse earlier in the day. Republicans now hold a supermajority.
Fully eliminating the tax would cut nearly half of the state’s budget, or about $2.15 billion. Nine states do not currently have a state income tax, and the idea of joining that group is an enticing proposition for West Virginia Republicans who believe it will spur economic investment in the state.
But Justice said the proposal initially would only cut the state income tax by half for everyone except “the super highest earners,” who would see a reduction by one-third.
“You take one bite of the elephant at a time,” he said.
Additional details of Justice’s proposal weren’t available Wednesday evening, but he said he did not want to “cut to the bone,” and instead wants to find new revenue sources. The Justice administration will present the budget to lawmakers on Thursday morning.
“I think what we’re going to have to do, that’s going to hit the everyday man, is we’re going to have to raise sales taxes by 1.5% if we’re going to eliminate our income tax,” Justice said.
Left-leaning advocates denounced Justice’s proposed sales tax hike. Ryan Frankenberry, director of the West Virginia Working Families Party, said it would “shift the tax burden of the wealthy to the working and poor.”
Democratic lawmakers said they would deliver a live response Thursday to the governor’s speech.
“The House Democratic Caucus plans to work with our Republican counterparts as much as we can to move our state forward,” Democratic House Minority Leader Doug Skaff said in a statement. “We also plan to hold the Governor and leadership accountable for their introduced legislation by asking: Who does this help? Who does this hurt?”
Justice did not specify how much taxes on tobacco and soda would go up, a proposal he said was also aimed to “trying to make us healthier.”
The state soda tax of a penny for a 16.9-ounce bottle has not increased since it was implemented in 1951, and the tax on cigarettes last went up to $1.20 per pack in 2016.
He also did not detail his wealth tax proposal. He said it would be “minuscule” and target “those that are very, very well-to-do, that can pay just a little bit extra.”
Senate President Craig Blair, who has made eliminating the income tax his top priority, said he was “encouraged” by Justice’s proposal.
“Governor Justice laid out a plan that will enable the Legislature to provide a tax cut to working West Virginians, and he’s done this while presenting the Legislature with a budget that does not increase spending over last year,” he said in a statement.
Earlier on Wednesday, budget officials said West Virginia’s revenues were mostly unchanged from last March, thanks to federal pandemic aid, low interest rates and tax collections faring better than what was worst feared. The federal government’s stimulus checks are thought to have boosted sales tax revenue.
But revenue from personal income and corporate taxes slightly fell, and the motor fuel tax that funds state road projects collected 17.5% less than the previous year.
The state’s rainy-day funds, combining to be over $900 million, are untapped in the proposed budget totaling $4.56 billion. Justice urged lawmakers to establish another rainy-day fund and pledged three more years of flat spending.
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Associated Press reporter John Raby contributed.
