CHARLESTON — The West Virginia House killed another tax proposal Friday that would include an increase in the sales tax, commercial activities tax and a phase-out of personal income tax.
After the House voted Thursday to kill the first tax bill, the Senate spent Friday reworking Senate Bill 1004 and overwhelmingly passing it 32-1. Sen. John Unger, D-Berkeley was the sole no vote.
Following a brief debate on a motion to send the bill to the Committee on Finance, which ultimately failed, the House rejected the bill on a 59-34 vote. The two bodies adopted a resolution to adjourn until May 15.
After the body passed the bill, Senate President Mitch Carmichael, R-Jackson, said he knew of the House's intention to adjourn and said members had indicated they would not take the bill up. He said he had hoped they would, citing the support from the Senate.
“It's the right thing to do,” Carmichael said after the Senate's floor session. “There is overwhelming support for that measure. It is a tax cut for working West Virginians. We confronted a crisis faced in West Virginia with a $400 million deficit. This brought money to the table this year and put money in working West Virginians' pockets.”
House Speaker Tim Armstead, R-Kanawha, said said some of the biggest hangups the Republican caucus has with the bill are the increases in sales tax and corporate net income. He also said members have expressed concerns with the way the income tax reductions are structured and with the severance tax.
He said he was encouraged by the Senate's decision to agree to the recess the House suggested the first night of the special session.
“We've had conversations with Senate leadership and while we don't agree on this bill, I feel we will find common ground over the next week and I look forward to having that conversation with the Senate and the governor,” Armstead said. “This is a positive step. The House has spoken on the bill and that is what it actually gets us to is step two, as we talked about last night.”
Carmichael said it wasn't his wish to adjourn.
“I don't want to do it. I would rather finish our work now, but that's the democracy we live in,” he said. “It's the right thing to do. If they want to adjourn, we will adjourn.”
Armstead said he hopes what would happen over the next week is that House and Senate leadership will get together to work on negotiating and working through their differences.
“I'm fully aware of what I'll be accused of is standing in the way of a deal between the governor and the Senate, but the fact is every member — all 134 members of the Legislature and the governor are all elected by the people of West Virginia to represent them and do what we believe is right for them,” he said.
“I believe clearly that reaction in response to the vote shows the House did not believe this was the right course.”
Armstead called the process backwards — moving with revenue measures first instead of putting the budget on the call.
“They went in the other direction and said let's determine what revenue we can raise so we can grow government, in my opinion and the opinion of other members of the caucus,” he said. “The caucus believes we should start the opposite way.”
Carmichael said the bill was predicated on growth in West Virginia and is an “optimistic vision for West Virginia.” In a previous committee meeting, revenue officials had presented a report showing under a similar plan that if the income tax is reduced and replaced with a higher consumption tax, then there would be a surplus the first year but the numbers would go downhill in the out years.
Carmichael said he didn't think that would be the case under this plan.
“We believe, and the governor believes, that this tax policy creates jobs and opportunity. I don't believe there will be deficits in the out years. I believe there will be growth and opportunity. In the unlikely event that it occurs, then we will make government live within its means, which is what we did this year.”
The Senate reworked the original tax bill, making some changes to triggering events to lower personal income tax and with the tiering of the severance tax. The bill added another tax bracket for those making more than $300,000 a year.
The Senate suspended rules and took the bill up Friday. An amendment by Sen. Mike Romano, D-Harrison, would have made a change to the upper tax bracket, lowering it from $300,000 to $100,000 and leaving the others in place. He said this would have allowed a reduction from a 7 percent sales tax under the bill to 6.7 percent sales tax. His amendment was ultimately defeated in a 12-19 vote.
“We're passing a bill on the backs of the working class,” he said. “It rewards the rich. The rich deserve a reward but they don't need a tax cut. If we pass this amendment, it puts money in the hands of the middle class.”
Sen. Robert Karnes, R-Upshur, opposed the amendment, saying it is not a burden on the working class. He said the bill is weighted to reduce the lowest income bracket by 40 percent and the upper income bracket by 10 percent.
“At every level, middle income, upper middle income, everyone receives a tax break under this plan. ...I don't think it's fair to characterize this as loading up a burden on the working poor of West Virginia. What this (the amendment) would do is negate a lot of the effect that we expect based on the science out there to come. ...If we increase the rate, it lessens the benefit to job creators.”
Before the bill went up for vote, President Carmichael came down from the podium to speak to the bill, calling it a momentous event for the state.
“This revitalizes and gives accommodation to coal interests of the state. It will create more jobs and opportunity. This embraces the most optimistic vision for the state of West Virginia.”
The Senate also referred three bills — Senate Bill 1001, increasing salaries for classroom teachers; SB 1002, increasing DMV fees and motor fuel and SB 1003, relating to the Parkways Authority — to the Committee on Rules.
The tax bill then headed over to the House. Delegate Andrew Byrd, D-Kanawha, made a motion to refer the bill to the Finance Committee.
House Majority Leader Daryl Cowles, R-Morgan, opposed the motion, saying lawmakers should take it up that day since they already know how they feel about it.
“Why wait? If we know where we are, then why wait,” Cowles asked.
Delegate Justin Marcum, D-Mingo, said voting against sending the bill to committee would send the wrong message.
“It's appalling we are sitting here because the House is a stumbling block to the state moving forward,” Marcum said. “To see the political mess we are causing because the bill would be referred to finance where we could properly vet the bill is crazy. When are we going to get off our high horse and help the people of West Virginia? Let's keep the bill alive, send it to finance and see what we've got. It's common sense. This is crazy.”
This amendment was rejected in a 34-58 vote. Cowles then made a motion to reject the bill on first reading, leading to the 59-34 vote to kill the bill.
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