Governor Jim Justice wants to double down on tax cuts.
Last week, Justice held a ceremony to announce that general revenue collections for the just-completed fiscal year would reach a level to trigger another three to four percent reduction in the state’s marginal income tax rates.
Then the Governor surprised everyone when he said he wanted a special session of the Legislature to tack on an additional five percent reduction. “I want to call you back, and I want to challenge you to some way, somehow try to do an additional five percent on the personal income tax,” he told lawmakers.
Legislative leaders were caught by surprise, and Senator Eric Tarr, the Senate Finance Committee Chairman and a budget hawk, was not pleased.
“The Governor dropped the bomb on us there on stage because we didn’t get a heads up, which tends to be his m.o.,” Tarr said during an appearance on Talkline last week. Tarr would have preferred a discussion ahead of time with Justice to hear his reasoning.
Tarr is worried that adding another $100 million in tax cuts on top of $90 million of scheduled tax reductions and $10 million in the phase out of the remainder of the state income tax on Social Security benefits, could put the state in a financial bind.
He predicted future state spending cuts that will be damaging and unpopular. “Either you’re going to have to go in and reduce spending that is so bloody that you can afford that… by bloody I mean it is going to be politically challenging and it will be a citizen uproar on some of those services,” he said.
Kelly Allen, Executive Director of the progressive West Virginia Center on Budget and Policy, is at the opposite end of the political spectrum from Tarr, but she is also worried about the impact of additional tax cuts.
“For the Governor to propose additional tax cuts when childcare centers are closing, public schools are losing support staff, and we face the worst child welfare crisis in the country is unthinkable,” Allen said.
But we will see.
Rates have already come down 21-and-a-quarter percent and if Justice gets his way, total income tax reductions will reach nearly 30 percent just since January 2023. Tax cuts are popular, this is an election year, and the state is running surpluses.
Justice challenged lawmakers to be bold. “For God’s sake a living, don’t be afraid. Don’t be afraid,” he said.
Actually, when it comes to budgeting, a dose of fear is healthy because the future is uncertain. Some legislators have been around long enough to remember when the state had to implement spending freezes and go long periods without giving pay raises.
Administration officials are working now to put together more detailed numbers to justify the Governor’s proposal. That should provide some clarity for lawmakers who need to be convinced the state can afford a deeper tax cut.