CHARLESTON – The state Senate Finance Committee soon will take up a measure creating an 8 percent consumer sales tax and a flat 2.5 percent personal income tax.
On March 13, the Senate’s Select Committee on Tax Reform passed the bill, sending it to the Finance Committee. It was being called the Fair and Simple Tax Reform Amendment, and it was unveiled before legislative leaders unveiled their state budget proposal later in the day.
Sen. Robert Karnes, R-Upshur and chairman of the Select Committee, said lawmakers also need to write an amendment to the state Constitution to ensure the tax changes are reflected accurately.
Later in the day, House Speaker Tim Armstead, R-Kanawha, and Senate President Mitch Carmichael, R-Jackson, shared the Legislature’s plan to balance the state’s budget by “controlling government spending and avoiding massive tax increases on struggling West Virginians.”
“This Legislature was elected to take our state in a new direction and create jobs,” Carmichael said in a statement. “Passing the largest tax increase in West Virginia history to fund hundreds of millions of dollars of new government spending is not the approach the people want. They want us to get government spending under control.”
“We fully intend to pass a balanced budget that controls spending while facing the reality that our state government needs to live within its means,” he said. “The ‘War on Coal’ over the past eight years has severely damaged our economy, cost thousands of jobs and slashed incomes for working families across the state. Our budget must reflect these challenges, not exacerbate them.”
The lawmakers’ budget proposal makes the following changes to Gov. Jim Justice’s budget bill that was introduced when the session began:
X Eliminate the “Save Our State” Fund, saving $105.5 million
X Implement “xmoothing” in Teachers’ Retirement System, saving $43.2 million
X Continue 2-percent mid-year cuts implemented by former Gov. Earl Ray Tomblin; saving $21.9 million
X Not including Justice’s proposed 2-percent teacher pay increase; saving $21 million
X Eliminate greyhound subsidies; saving $15 million
X End the casino modernization subsidy; saving $9 million
X Forego Justice’s $5.6 million tourism advertising increase
X Redirect a $38.3 million transfer for the Workers’ Compensation Fund
X Redirect a $30.9 million General Revenue/Lottery Surplus transfer
X Forego a General Revenue transfer to the Division of Highways; saving $11.7 million
X Accept a $2.8 million increase to the beer barrel tax (from $5.50 to $8.00)
X Begin a wholesale liquor increase from 28 percent to 32 percent (does not require legislation)
Lawmakers say these changes would leave about a $150 million spending-to-revenue gap, which lawmakers will eliminate by prioritizing spending in other areas of the budget. Those gap-closing measures will be implemented throughout the course of the normal budget process in the House and Senate’s Finance committees.
“These actions will be difficult, but we owe it to our citizens to do everything we can to make their government run more efficiently without constantly asking for more money from taxpayers,” Armstead said. “Our citizens have asked us to make tough choices to get government growth under control, and this budget will do just that.”
“We fully intend to have this budget passed and onto the Governor’s desk before our 60-day session ends April 8,” Carmichael said. “The days of spending more than we can afford are over. It’s time for our government to live within its means, and this budget approach will accomplish that.”
Justice didn't have kind words about the lawmakers' plan.
"Bless their hearts, but the Legislature's framework will not save the patient," Justice said in a statement. "What we saw today from the House and Senate only kicks the can around the block. It doesn't give our classroom teachers a pay raise, it doesn't increase tourism advertising, it doesn't bring jobs, and it lacks the tools to jumpstart our economy.
"The clock is ticking; let's work together to pass a responsible budget that brings jobs or we will die 50th. My Save Our State plan will get us out of this budget hole and put us on a pathway to prosperity.
"I've heard a lot about the need for more cuts, but I haven't heard any specifics from the Legislature."
Karnes had said the select tax committee hoped to eliminate the income tax rather than having a flat tax, but estimates show it would have meant a revenue decline of $870 million over four years. The new plan eventually would eliminate the income tax, but it would be based on economic growth until a planned phase-out begins in 2023. It also would lower severance taxes, especially on coal.