Gov. Jim Justice said Monday he is disappointed the Senate shelved his plan to cut the personal income tax by 10 percent, and he is skeptical of the Senate’s alternate plan.
The Senate’s priority is to eliminate the equipment and inventory tax as well as the vehicle property tax, a move senators have said will save businesses and residents money, and entice companies and people to move into the state.
Amendment No. 2, which will be on the November ballot, would give legislators the power to eliminate or reduce the taxes, which provide needed revenue to counties and schools.
Senators have said if the taxes are eliminated the state will reimburse counties for any funding lost on a yearly basis, which would cost the state at least $500 million a year.
The impact on the state budget is one of the issues in the plan that concerns Justice, who put the reimbursement figure at $700 million a year that “you are going to build into the base (budget) in West Virginia.”
“What if we have just a little twist of a downturn in the economy?” he said. “Then what has to happen? The counties have a guaranteed income stream right now. They would have to look back at the counties and say, ‘You’re going to have to cut.’”
But Justice, who addressed the issue at the groundbreaking of a segment of the Coalfields Expressway in Welch, said that revenue is used to help fund county schools and to pay firefighters and police and EMS personnel.
It is a “big-time risk, big-time,” he said, adding that the state is doing well now financially but there is no guarantee.
“We have stood for local control,” Justice said. “Let the people decide things. Now, what you would basically be doing and limited to, you would be signing up and saying, ‘We want Charleston to control all our lives.’ That is what you would be doing.”
All he can do is tell people what the way he sees it, he added.
“I believe in local control. I believe it is a high-risk gamble. I believe the benefits are to the larger companies versus the workers, and I don’t believe it will have anything close to a growth impact the personal income tax would have.”
Justice said if the Senate plan is done, then “you can’t do the personal income tax. There is no way.”
Many county officials share Justice’s concern about what would happen if the state had difficulty reimbursing counties the money lost in eliminating the equipment and inventory tax and vehicle property tax. They remain skeptical and are pursuing more information about what the Senate is doing to make sure those reimbursements are guaranteed in the years ahead.
Some officials from Mercer, Monroe, Greenbrier and Summers counties met at James Monroe High School in Lindside Friday, a meeting organized by Monroe County Commissioner Melvin Young.
Del. Roy Cooper, R-Summers County, participated virtually and said voters must first pass Amendment 2 in November, but if that happens, it is still unclear what legislators will do.
“It’s on our minds to make sure counties don’t go in a hole,” he said. “I am thinking that I believe it is going to be OK to phase it in over time.”
Young asked if counties could end up being on their own regarding any revenue from the taxes taken away.
“They are not going to do that,” Cooper said of legislators. “I think the state would have to come in and help make adjustments to make sure you would not get in that position. Whatever we pass, it will have some safeguard in there for the counties.”
Matthew Harvey, a Monroe County native who is now prosecuting attorney for Jefferson County as well as president of the state Association of Counties, also joined the meeting virtually.
Harvey said there is a lot of uncertainty about the plan at this point, but he thinks the Senate wants to do a full elimination of the taxes by 2024 and the House wants a “more measured approach.”
Although the state is in solid economic position (a surplus of $1.3 billion for the 2021-22 fiscal year), with the high inflation a recession is possible, he said.
Tough decisions will have to be made, and handing total control of the revenue over to Charleston is “getting at the heart of the nervousness” at the county level, Harvey added.
But the state is doing much better financially, Cooper said, referring to the surplus and a $1 billion “rainy day” fund.
“I can’t get my head around the idea that we would not want to pass some of this savings back to folks as a way to invigorate businesses at local levels,” he said, adding that taxes in the state have not been raised in years, except for a fee or two. “West Virginia is a much better state now with positive growth.”
Cooper said he thinks legislators are asking counties to trust them.
“I know that is hard, but I think that is what we are asking for,” he said.
“My concern is when the legislature looks at things differently than counties do,” Mercer County Commissioner Bill Archer said, explaining that any interruption in revenue would hurt smaller counties in particular. “Right now, small counties are staring at excessive expenses.”
Archer said legislators should be “very cautious” about changing the system already in place.
“If it ain’t broke, don’t fix it,” he said.
Archer said eliminating the taxes may be a “positive idea” as far as attracting more businesses, “but at the same time I am really concerned about when the flow (of revenue) that we have stops.”
Pulling the plug on the revenue in Mercer County, for example, would mean a loss of about $11 million a year, $8 million of which goes to schools.
“It may sound like a no-brainer in Charleston, but I would like to know as much as we can about it before any decisions are made,” Archer said.
“I assure all of you, we are going to be as cautious as can be,” Cooper said, adding that he is not privy to the Senate plan.
State Sen. Chandler Swope, R-6th District, recently said the Senate continues to put together a plan that includes an ongoing revenue stream to reimburse counties at, or even above, what they receive through the taxes.
Swope said that plan should be ready before the November election.
Greg Vandall, Summers County assessor, said it’s not just a matter of “trust me.”
“We want to see something a little more concrete than that,” he said, adding that sometimes plans made in good faith get changed.
“When you give away the authority to decide for counties, it doesn’t always work out to where it should be,” he said.
Young said he is not yet for it or against it, but he is afraid smaller counties may lose their autonomy with the power over the revenue taken away and then be combined with other counties.
Harvey said residents rely on local elected officials for advice on how to vote so it’s important for them to keep up to date about what is developing.
“It is important we are working together to have accurate information,” he said.
Young said Senate Finance Chair Eric Tarr was scheduled to participate in the meeting but the Senate was still in session on the abortion bill, so he will schedule a virtual meeting to include Tarr and anyone else interested in participating to get the latest information on what the Senate is doing.
Most in attendance said it is likely voters will pass Amendment 2 this fall, so this will be an ongoing issue.
Justice also said he will not stop pushing his 10 percent personal income tax cut.
“We threw away $245 million that should go into the pockets of West Virginians now,” he said. “I am going to push it, but too many people are hung up on the next elected office.”
Rejecting the personal income tax cut is “turning your back on workers in West Virginia,” he said. “That is who we need to take care of – our people.”
However, Justice said he would be willing to have roundtable discussions with legislators to try to work out a solution to the issue.
— Contact Charles Boothe at email@example.com