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Historic Tax Reform Proposal To Highlight State Of The State

Gov. Jim Justice is also required by law to submit a 2023 fiscal year budget to the legislature.

Gov. Jim Justice will deliver his seventh State of the State address Wednesday evening at 7 p.m. He is also required by law to submit a 2023 fiscal year budget to the legislature.

On the heels of several major corporate economic development announcements in 2022, the governor said in a recent media briefing he will have several more such announcements tonight.

“We’ll have several announcements of companies that are coming to our state, or expansions of companies that are already here,” Justice said.

With a state budget surplus heading toward $2 billion, he said tonight’s address will highlight an unprecedented tax reform plan.

“We’ll be announcing the biggest tax cuts in the history of this state, hands down,” Justice said. “It’ll be a great year to celebrate our hard work as West Virginians.”

Justice had proposed a 10 percent personal income tax cut. House Majority Leader Eric Householder, R-Berkeley, has publicly said that the cut could be as much as 50 percent.

Other pressing issues expected to come up include PEIA, DHHR and education reforms along with roads and infrastructure.

2023 State Budget Process Will Be Contentious, According To Officials

Senate Finance Committee Chair Eric Tarr, R-Putnam, has said the Senate will challenge the Justice budget, especially on tax reform.

In a presentation before the legislative Joint Committee on Finance, Revenue Secretary Dave Hardy highlighted specific increases in what’s heading toward a $2 billion revenue collection surplus.

Hardy said state interest income jumped from $21,000 last year to nearly $39 million so far this year.

“That blown up number is because interest rates have gone up so much,” Hardy said. “And we have, of course, substantial money at the Bureau of Treasury Investments.”

Hardy said a 113 percent increase in severance tax revenue came largely from natural gas, not coal.

“Seventy percent of our severance tax revenue now is from natural gas,” Hardy said. “That’s the number that we are watching the most carefully.”

State economists say natural gas severance tax gains will likely decrease this year. John Deskins, director of the Bureau of Business & Economic Research at the WVU Chambers College of Business and Economics said at a media legislative lookahead last week that higher natural gas prices boost both corporate and personal income tax collections through royalty income.

“Reductions in gas prices would likely reduce coal prices as well,” Deskins said. “A consideration of all three of these factors would further reduce the state’s estimated surplus.”

Gov. Jim Justice said he will present a mostly flat budget for fiscal 2023. He said he understands that the Senate will continue on a budget path to cut business and inventory taxes.

“I really don’t see how you do that. We know exactly what their plan is. We’re continuing to talk back and forth to come up with a plan that will result in a good result,” Justice said. “I hope and pray that the intent from the Senate side is that what we end up trying to do is the greatest thing we can possibly do for the people of our state.”

Senate Finance Committee Chair Eric Tarr, R-Putnam, has said the Senate will challenge the Justice budget, especially on tax reform. Tarr and Senate President Craig Blair, R- Berkeley, have said the Senate’s relationship with Justice is not solid at all.

“Number one is the governor doesn’t reach out to us,” Blair said. “If you remember back when we were dealing with constitutional amendments, the governor said that the Senate was corrupt, and we were the swamp and specifically that I was corrupt and Eric Tarr was corrupt. So I guess they believe that.”

The governor’s budget gets received as a bill, and that’s the base that legislative committees work from to make their own revisions. There is one single budget bill introduced in each chamber to avoid confusion. It’s the House’s turn to take the lead on the budget this year, which means it will be their bill (whatever the final version looks like) sent down at the end.

Justice is required to present his proposed budget to the legislature on the first day of the 60-day regular session. That’s Wednesday, Jan. 11.

What's Next For Republicans And Democrats In The Legislature?

Republicans bolstered their supermajority on election night but Democrats say they will continue to work for policies that help people.

Senate President Craig Blair, R-Morgan, said he’s buoyed by a 30 to 4 Republican supermajority (what he now calls a super-super majority) in the senate, but he also said that comes with a caveat.

“We’re really good at getting our candidates across the finish line,” Blair said. “But we got some learning to do on how to get amendments done.”

All four proposed amendments to the state constitution failed Tuesday night. Blair said, following the failure of Amendment 2 which would have given the legislature the ability to change or delete property taxes, the legislature needs to continue promoting a drug-free, educated workforce and do a better job educating voters on state revenues. But he said it will be tough to bury the political hatchet with Gov. Jim Justice who opposed Amendment 2.

“I find it off-putting that we’ve been called ‘the swamp’ and we’ve basically been called ‘mired in debt,’” Blair said. “We were called corrupt and that’s not true.”

Re-elected, Del. Mike Pushkin, D-Kanawha, said, as state Democratic party chair, he’ll continue a non-partisan push for policies to help West Virginians.

He did see an election night bright spot in voters defeating all four amendments.

“They still have a very healthy mistrust of Republican policy,” Pushkin said. “They did not want the Republican legislature in control of county budgets. They didn’t want the Republican legislature in control of our public education.”

Pushkin says any compromise in tax reform moving forward needs to be citizen-centric.

“It must be about giving tax relief to the people who really really need it,” Pushkin said. “Not just to the wealthiest West Virginians or to out of state corporations.”

Election results become official when certified by county clerks next week.

A Final Preview Of Amendment 2

Amendment 2 looks to be the most contentious issue on Tuesday’s ballot. If West Virginia voters say yes to Amendment 2 on the November ballot, the West Virginia Legislature will have the authority to eliminate business equipment and inventory taxes and the property tax on vehicles.

Amendment 2 looks to be the most contentious issue on Tuesday’s ballot.

If West Virginia voters say yes to Amendment 2 on the November ballot, the West Virginia Legislature will have the authority to eliminate business equipment and inventory taxes and the property tax on vehicles.

Rebecca MacPhail is president of the West Virginia Manufacturers Association. She supports Amendment 2 and modernizing property taxes. She said maintaining these business property taxes puts West Virginia at a competitive disadvantage. She notes that when neighboring Ohio was facing a recession and bleeding out manufacturing jobs, it phased out its machinery and inventory tax between 2005 and 2008.

“Then, between 2009 and today, Ohio’s added 70,000 manufacturing jobs,” McPhail said. “I think that’s compelling. Is that a silver bullet? No. Is it an impediment, absolutely.”

Former legislator and current Marshall County Commissioner Mike Ferro opposes Amendment 2. He said it will lead to giving up a dedicated revenue source and taking away constitutional protections. He said studies by local economic development experts show the inventory tax is not a factor. He sees similar evidence with the state when it comes to recruiting major corporations like Nucor and Berkshire Hathaway.

“Our Economic Development Council and (Secretary) Mitch Carmichael, they’re bringing in big businesses and the inventory tax does not matter to them,” Ferro said.

McPhail said West Virginia is the only state to enshrine an untouchable tax in its constitution. She favors the Senate tax reform plan as a strong beginning to a needed legislative dialogue.

“It will lead to having a serious policy discussion about how we can best implement tax reform,” McPhail said. “Reform that’s going to provide long term growth and sustainability versus these up and down cycles at the county level.”

Ferro said he worries about what happens if the Senate plan runs into a state revenue downturn three years down the road. He agreed with at least one tax guru who surmised that with a state revenue shortfall, counties would economically suffer.

“A tax shift would occur, more than likely, with real estate,” Ferro said. “Assessments could be going up from 60 to 80 to 100 percent and perhaps the homestead exemption for seniors being lost.”

Amendment 2 also gives the legislature the authority to eliminate the vehicle tax. Ferro said he and county commissions across the state favor Gov. Jim Justice’s vehicle tax rebate plan over a constitutional change.

“You’re talking about $150 million or so,” Ferro said. “They’re gonna take it out as your general revenue. Not as simple as you pay your taxes, you get your receipt emailed and you get your money back, but county commissioners would be willing to work with the legislature on that.”

McPhail said from her point of view as a West Virginian, the vehicle tax is progressive and onerous.

“It is an inconvenience to vehicle owners to have to dig through and not only pay the tax, but find the receipt and take it when it’s time to renew your tags at the DMV,” McPhail said. “I think some of the proposals out there to address that in a different way without eliminating the tax would only add to that inconvenience and the amount of work that taxpayers have to do to get their money.”

Both Ferro and McPhail favor tax reform but each see different avenues to success. Ferro said Amendment 2 is a power grab. McPhail said it’s a good start.

Power Companies File Settlement Agreement with PSC

Appalachian Power and Wheeling Power have filed a settlement agreement seeking to use tax reform funds to offset fuel and vegetation management costs, allowing customer rates to remain stable for two years.

The companies said in a news release that the agreement was filed Monday with the West Virginia Public Service Commission, which must approve the deal.

The settlement would offset $110 million in costs. The release said without the agreement, rates could have risen by as much as 11 percent.

Appalachian Power and Wheeling Power are units of American Electric Power Co.

Trump Tax Reform Roundtable Veers Toward Race for Manchin's Senate Seat

President Donald Trump held a roundtable discussion Thursday in White Sulphur Springs that was originally billed to highlight the impact of last year’s federal tax reform legislation. But, at various points, Trump veered off course to address issues such as immigration, trade, energy policy and the race for U.S. Senator Joe Manchin’s seat.

Before hearing from West Virginians about their families’ savings from a recent tax-reform bill, Trump focused heavily on immigration issues — including his call for National Guard assets to be deployed to the U.S. – Mexico border. He attacked Manchin on the issue.

“We have very weak laws because of the Democrats and Joe. I mean Joe Manchin — he’s really not helped us on this stuff,” Trump said.

According to the Migration Policy Institute, West Virginia’s unauthorized immigrant population is estimated at 6,000 residents. Those in the crowd cheered each time Trump mentioned plans to build a wall along the southern border of the United States.

Finishing his opening remarks, Trump noted that he had gone off script. In that moment, he highlighted a theme that would run through the rest of the event.

“Now, I’m reading off the first paragraph [and saying] ‘This is boring.’ Come on, we have to say — tell it like it is,” said Trump as he tossed a piece of paper into the air. “We have to get Republicans in office.”

The president and an audience of a few hundred then heard from a dozen local business owners and residents about recent tax reform legislation that they say has positively impacted their employees and families. Many in the group said the tax overhaul has helped them to the tune of thousands of dollars in savings.

In closing, Trump thanked Governor Jim Justice and Senator Shelley Moore Capito before directly acknowledging that Congressman Evan Jenkins and state Attorney General Patrick Morrisey — who were flanking the president at the table — are both vying for the Republican nomination to unseat Manchin in November.

“Patrick and Evan, good luck. I don’t know, you two. Good luck,” said Trump before asking the audience to cheer for Jenkins or Morrisey in a demonstration of how the crowd planned to vote in the upcoming GOP senate primary.

Jenkins garnered louder cheers than Morrisey.

“This is his congressional district,” said Morrisey, noting that the event was being held in West Virginia’s Third Congressional District — which is currently seated by Jenkins — and that the Senate race was statewide.

“It was fairly close,” replied Trump.

Manchin, who faces his own primary challenger in fellow Democrat Paula Jean Swearengin, attended a memorial for the 29 men who lost their lives in the Upper Big Branch disaster 8 years ago.

Former Massey Energy CEO Don Blankenship, another GOP candidate in the race for U.S. Senate, wasn’t in attendance at the Thursday roundtable or the UBB memorial. Blankenship served one year in federal prison for willfully violating mine safety standards in the wake of the April 5, 2010 disaster.

In a statement about the tax reform discussion, Manchin called the event “political posturing” and said West Virginians failed to get answers on healthcare, Social Security, miners’ pensions and why some aspects of the tax reform plan aren’t permanent.

The primary election for open races for both parties is slated for May 8.