Gov. Jim Justice spent hours caucusing with House Democrats Monday morning as a special budget session continued at the statehouse.
House Minority Leader Tim Miley said the governor spent more than two hours discussing his latest plan to balance the 2018 budget.
Justice presented legislative leaders with a new proposal last week to increase the sales tax to 6.35 percent and get rid of a number of exemptions to increase revenue for the upcoming fiscal year.
That increase, however, was paired with a reduction in personal income tax rates, totaling 20 percent over 3 years.
Miley said members of his caucus shared some concerns about the plan with the governor, particularly about a proposal to impose the sales tax on construction and renovation labor.
The minority leader said the governor may be willing to make some concessions in that area by adding an exemption for labor costs up to $15,000, but Miley is still looking for an overall package that results in growth.
“An ideal plan to me is one that makes sure the budget holes are going to be filled not just for 2018 but also the out 5 or 6 years,” he said. “Also, one that an economic benefit of growth in jobs.”
Miley added that job growth could come from the governor’s plan to increase the gasoline tax and fees at the Division of Motor Vehicles to pay for new road construction.
Budget negotiations are continuing at the Capitol Thursday after a new revenue deal was presented to lawmakers earlier in the week.
Gov. Jim Justice presented the new revenue bill to lawmakers Tuesday. The plan has been at the crux of budget negotiations between his office and members of both the House and Senate.
It includes a hike of the consumer sales tax from 6 to 6.35 percent and would get rid of several exemptions, imposing the tax on things like cell phone bills and home construction and renovations.
It would reduce the personal income tax by 20 percent over a three-year period, dropping the rate by 7 percent in the first year and setting economic triggers for the additional reductions.
It’s those triggers, though, that House Minority Leader Tim Miley said Thursday have yet to be hashed out.
“I’ll be honest with you, if we get to that point,” he said, “that’s where the hardest fight is going to be because many of us are very concerned as to why we are reducing our income tax when we’re in the midst of a budget crisis.”
Miley said his caucus will not support income tax reductions based on state revenue alone.
The triggers could reflect job growth in the state, he said, or be tied to salary growth according to Workforce West Virginia data.
The full Legislature will return to the Capitol Monday to continue their work on the revenue measure and ultimately a budget bill.
Miley said it’s not likely that legislative leaders and the governor’s office will have a final deal on Monday, but he’s hopeful they can find a compromise and approve a budget by the end of next the week.
Both the House and Senate will be presented with their respective 2018 budget plans on the floor Wednesday, and in the House, that budget will rely on nearly $140 million in new revenue.
The revenue comes from getting rid of certain exemptions to the state’s sales tax in an effort to lower the overall rate down the road.
As it came out of the Senate, Senate Bill 484 would have captured some $12 million a year in taxes paid on some road construction materials and kept them in the general revenue fund for legislative appropriation.
Credit Perry Bennett / West Virginia Legislative Photography
/
West Virginia Legislative Photography
Del. Michael Folk speaking during a floor debate.
While the bill still contains that provision, the House Finance Committee made significant changes to the bill over the weekend, which were narrowly accepted by the body during a Tuesday evening floor session.
“One of the things that we learned in tax reform that we’ve been studying for the last two years is that you want to reduce your rates to the point that you have a competitive advantage,”House Finance Committee Vice Chair Eric Householder said, “and if you want to broaden out your sales tax base, broaden it out slowly, and that’s what we’re doing here tonight.”
The House Finance Committee amendment broadens the base of taxable goods and services and lowers the overall rate.
It gets rid of the exemptions on a number of services in two phases, July and October this year.
In July 2018, the amendment calls for a reduction of the state’s 6 percent sales tax to 5.5 percent, then to 5.25 percent in July 2019. After that date, the the tax rate would drop by a quarter of a percent each year if the sales tax revenues for the previous fiscal year exceed the 2017 incomes. The rate could not be reduced, though, below 4.75 percent.
“West Virginia’s tax structure is pushing jobs and people away from this state. We cannot expect our economy to grow if we do not provide a system that will allow for growth,” he said. “Broadening the sales tax base and lowering the rate is a good idea and it’s a move in a direction of sound tax policy.”
Several members of the House leadership team joined Householder in speaking in support of what they’re calling a tax reform measure, but Republican Del. Michael Folk called the bill a tax increase.
“People in this body and on this side of the aisle want to get out of here so bad, they’re willing to stick it to the taxpayers,” Folk said.
A number of Democrats expressed concerns about the provision, including House Minority Leader Tim Miley.
He said the amendment only increases taxes on West Virginia consumers and does not include a sacrifice from the business community.
Democratic Gov. Jim Justice is pushing for a small business tax increase—which the West Virginia Chamber of Commerce supports.
Credit Perry Bennett / West Virginia Legislative Photography
/
West Virginia Legislative Photography
House Minority Leader Tim Miley during a 2017 floor session.
“Nothing in here reflects to me a sacrifice being made by the business community in this state, the same community that has indicated very publicly that they are willing to help pull the rope,” Miley said, “and so unless and until we have a comprehensive plan in which the business community has buy in and makes part of the sacrifices with the citizens in this state, I think we should reject this approach.”
The amendment was accepted on a 53 to 46 vote in the chamber.
The amended version of Senate Bill 484 will be up for a final vote Wednesday.
Speaker Tim Armstead says the Republican leadership has cut the House of Delegates staff over the past two years, saving more than $367,000 on its annual payroll.
The Kanawha County Republican says that in 2014, before a Republican majority took control of the chamber, the House had 49 full-time staff, 68 per diem employees and an annual payroll of $3.1 million.
This year, it will have 43 full-time staff and 52 per diems.
Armstead says the cuts have not affected productivity or the level of services.
According to Armstead, the House has saved more than $1.6 million the last two years by streamlining the interim committee process and reducing compensation for lawmaker and staff travel.
Democratic Minority Leader Tim Miley didn’t immediately reply to requests for comment.
