To cut or not to cut is now the question
We now have nearly two weeks until lawmakers gather for the Sept. 30 special session to pass Gov. Jim Justice’s 5% cut in personal income tax rates, and at this point I’m just not sure it can pass.
That doesn’t mean it won’t pass. There is certainly time for the governor’s advisors (Chief of Staff Brian Abraham and Department of Revenue Secretary Larry Pack) and legislative leaders to come to some form of agreement on bill language to make such a cut happen.
The hang up on the state Senate side appears to be how to pay for the 5% personal income tax cut, which would return approximately $115 million to taxpayers if approved by the Legislature at the end of the month. But inversely, that cut takes $115 million in personal income tax revenue out of future general revenue budgets.
Justice appears fine with the personal income tax cut being paid for out of the nearly $562 million in unappropriated surplus from the end of fiscal year 2024 after expenses and $80 million in unappropriated monies for the current fiscal year. But those are one-time monies and don’t factor in projected reductions in end-of-fiscal-year budget surpluses or future expenses the next governor and lawmakers will need to factor in when crafting the next budget.
State Senate leaders (Senate President Craig Blair, R-Berkeley, and Senate Finance Committee Chairman Eric Tarr, R-Putnam) want to see a plan from the governor that cuts state spending or finds the money some other way to equal to the revenue that would be lost from a 5% personal income tax.
Sure, the full $115 million price tag wouldn’t go into effect until fiscal year 2026 beginning in July 2025, so the state can handle the loss of revenue in the short-term. But Republican lawmakers – who all support phasing out the personal income tax – believe in doing so slowly so that cuts don’t outpace the natural growth in tax revenue and the state’s growing expenses.
In interviews last week, both Blair and Tarr said they would be willing to consider a 5% tax cut proposal only if it includes an equal cut in state spending from the current fiscal year.
“I’m concerned personally, and I think a lot of my members are in the Senate, that if we are going to do an extra $110 million tax reduction, we’ve got to make sure we don’t make that point in time that we look back and we failed and future legislators might have to come back and increase taxes,” Blair said last Tuesday on WV MetroNews Talkline. “That’s the last thing we want to do.”
“It sounds good to say … we’re going to knock out another 5% and another $115 million in taxes,” Tarr said Thursday on the Dave Allen Show on 580 WCHS in Charleston. “(But) if you go too aggressive too fast, what happens is you have to go back in and reverse that policy in order not to put the state upside down for our obligations.”
When I asked Gov. Justice last week if he would be willing to entertain cutting state spending in exchange for his 5% personal income tax cut, he said “absolutely” with a caveat.
“If they can come to me with something that they would propose that would basically cut things and everything, then we’ll look at it,” Justice said.
Legislative sources, however, were annoyed with that answer. In their minds, it’s not up to lawmakers to present the governor with options; it’s the governor’s job to present them with a plan.
You see, special sessions called by the governor don’t follow the same rules as the annual 60-day regular session of the Legislature. These kinds of special sessions are tightly controlled. Lawmakers can only consider the bills the governor puts on the special session proclamation. They can’t introduce their own bills (though some try, usually just for the sake of publicity from some unsuspecting reporter who doesn’t understand the bill can never be taken up).
In fact, depending on the wording of the bill and the proclamation language, sometimes lawmakers can’t even amend a special session bill due to how narrowly tailored the bill language is. Justice could word his 5% tax cut bill in such a way that lawmakers have no choice but to vote the bill up or down.
So, when Justice says that lawmakers need to come up with a plan for cutting state spending for make his 5% tax cut possible, you can understand why lawmakers would be annoyed by that. Justice is the one pushing for this tax cut. Justice is the one who called a special session outside of the normal legislative interim meeting schedule, meaning a special session that will cost taxpayers $35,000 per day until they gavel out. That could either be two-to-three days, or longer.
Many lawmakers believe that if Justice is going to bring lawmakers in for a special session (which begins the day before October, when the monthly state tax collection numbers are released), then it is up to the governor to present lawmakers with a plan on how to make it happen. Perhaps that will happen when lawmakers and the Governor’s Office begin having meetings leading up to Sept. 30?
Then again, Justice keeps saying he’s been in discussions with legislative leadership on all of this, while the legislative leaders I’ve talked to said they haven’t heard one word from the governor.
It kind of makes you wonder how Justice plans to introduce and work on legislation if he is elected to the U.S. Senate in November if he can’t negotiate with state lawmakers on his swan song.