CHARLESTON – Gov. Jim Justice has signed what is being called the largest tax cut in state history.
Flanked by state Senate President Craig Blair and House Speaker Roger Hanshaw, Justice signed House Bill 2526 into law March 7 during a ceremony at the Culture Center on the state Capitol Complex.
“I thank Speaker Hanshaw, President Blair, our leadership teams, finance folks and all the people who pulled the rope,” Justice said. “It’s taken two years to get here, but this is a monumental day for us all.”
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The bill contains provisions for additional annual personal income tax rate cuts in future years beginning as early as 2025 to the extent that actual state revenue growth exceeds consumer inflation.
State officials estimate the financial impact of the bill is $695 million in fiscal year 2024 and $817.8 million upon full implementation. The bill will return more than $750 million to West Virginians through a cut to personal income tax, rebate of the car tax, a 50 percent rebate of the property tax on machinery and inventory to small businesses and tax credits to veterans.
Income tax rates are reduced by 21.25 percent this year. Additional income tax cuts will occur in 2024 through refundable tax credits equal to the amount of car taxes paid to county sheriffs, and half of the amount of tangible personal property taxes paid to the county sheriff for qualified small businesses. Disabled veterans are eligible for an additional income tax credit equal to the amount of property tax paid to the county sheriff on their homestead.
“It also puts us on a pathway toward the complete elimination of our personal income tax,” Justice said. “It’s a win-win for all West Virginians, and I couldn’t be more pleased with the outcome.”
The governor’s office says the state Tax Division will issue revised withholding tables no later than April 1, and taxpayers who pay estimated payments may reduce their payments beginning on April 15.
West Virginia currently has a budget surplus of hundreds of millions of dollars as a result of low revenue projections, high energy prices brining in severance tax and other factors.
For example, Justice’s office announced last week the state’s general revenue projections for February were $111.8 million above estimates and 5.7 percent ahead of prior year receipts. Severance tax collections were $71 million of that. The governor’s office also said year-to-date collections are $1.1 billion above estimate.
According to the West Virginia Center on Budget & Policy, the tax cuts “disproportionately serve the wealthy, are fiscally reckless and come at the cost of years of needed investments in services that benefit us all.”
“Rather than utilizing state revenues to create shared prosperity by investing in programs and services that benefit all West Virginians, HB 2526 enacts permanent tax cuts that undermine public investments and further rig our tax system for the wealthy,” a statement from the think tank read. “Nearly two out of every three dollars of the legislation’s personal income tax cuts go to the top 20 percent of households while the other tax provisions blatantly override the will of West Virginia voters by enacting a workaround of rejected Amendment 2 business tax cuts.”
Like with previous tax cut efforts, the Center on Budget and Policy said lawmakers prioritized pursuit of a better business climate ranking which it said has little do with the realities of doing business “rather than investing in the families and workers who already call West Virginia home.”
“This legislation will undermine investments in our schools, health care, and infrastructure,” the research organization said. “In fact, it’s already having negative impacts on public investments.
“For four years, lawmakers have prioritized flat, austerity budgets that have resulted in a public employees’ insurance crisis, crisis-level public agency vacancies, and unacceptable levels of child poverty and children in foster care. While lawmakers touted ‘surpluses’ as evidence of the state’s strong economy, numerous bills and budget requests for funding for services that would help families and workers were denied or altogether ignored.”
The group called the surpluses used to justify the tax cuts “a house of cards that is about to fall.”
“These permanent tax cuts for the wealthy rely on underfunded public services, temporarily high energy prices and one-time federal COVID-19 relief funding,” it said. “When these factors subside, state lawmakers will find themselves in an untenable situation, forced to either further slash a budget that’s already been cut to the bone or raise other taxes – usually sales and property taxes, which hit poorer workers, families and communities harder than wealthier ones.”
Others praised the bill’s passage.
“We are happy to see a pathway emerge that will return dollars to hard-working West Virginians’ pockets,” Americans For Prosperity-West Virginia State Director Jason Huffman said. “After years of fiscal responsibility, the right thing for policymakers to do is provide much needed relief to our citizens.
“This historic tax cut, once it completes legislative action, represents a good start. With this framework in place, we will look forward to continuing to work with policymakers to provide West Virginians with additional transformational tax relief.”
The president of the West Virginia Chamber of Commerce also hailed the bill’s passage.
“We believe the revenue outlook for West Virginia will support reductions in tax collected by the state,” Steve Roberts told The West Virginia Record. “We also note that for employers this is a limited tax reduction bill. Our corporate net income tax rate, the tax on business equipment and inventory and our unemployment comp tax rates makes us outliers in those areas. We hope to work on these issues in a future session of the Legislature.”
Justice said the world is watching West Virginia.
“The world sees West Virginia in a different light today,” he said during Tuesday’s signing ceremony. “We’re not the blunt end of a bad joke. We’re the diamond in the rough people missed.
“We’ve known for a long time how good we were. Today, we put our stake in the sand, inviting everyone to our state.”