Senate Finance Chairman Eric Tarr, R-Putnam, seen on the Senate floor during a special session of the West Virginia Legislature on Oct. 7, 2024, was against a 5% personal income tax cut, but said he felt comfortable with a 2% cut after the Justice administration identified ways to reduce spending.
(Will Price | West Virginia Legislative Photography)
Gov. Jim Justice’s call for a personal income tax cut moved forward on Monday after the governor lowered his request, making it more appealing to lawmakers. While the bill, which calls for a 2% reduction, is advancing, some lawmakers have concerns about using funds from the state health departments to help pay for it.
Gov. Jim Justice amended his special session call on Monday, reducing his request for a personal income tax cut down to 2%, which made it more appealing to lawmakers during the special session. He had originally asked lawmakers to consider a 5% cut, but the bill faced criticism, particularly in the Senate, due to the state’s finances.
There is already a 4% personal income tax cut going into effect in January 2025 because the state hit an economic trigger. Lawmakers said everyone paying taxes will see an additional reduction under the proposed legislation.
Del. Daniel Linville, R-Cabell
The House Finance Committee approved the bill that would put an additional 2% cut also in effect in January. Del. Daniel Linville, R-Cabell, said the additional tax cut represented lawmakers’ “continued commitment to providing tax relief to West Virginians.”
“This means beginning next year, West Virginia’s families and small businesses will see their state taxes reduced by more than 26% from where we started two years ago,” he said. “Our economy continues to grow over and above inflation and paychecks are getting bigger. We’re proud to keep delivering a stronger economy, lower taxes and bigger paychecks all across our state.”
Justice’s proposed additional 5% personal income tax cut was estimated to equate to about $110 million. Acting Revenue Secretary Larry Pack, R-Kanawha, told members of the House Finance Committee that a 2% cut would cost the state $46 million.
Pack said the $46 million will be paid for by $19 million in a revenue bond that’s about to be paid off. Another $20-$25 million would come from available money after the lawmakers split the former West Virginia Department of Health and Human Resources into three new departments.
“We are going to get most of it out of the DHHR reorganization,” Pack said. While he didn’t give specifics about where the dollars were coming, Pack said he was pretty confident that no health services would be cut in order to cover the cost of the proposed additional tax cut.
The Senate unanimously approved their version of the personal income tax cut bill.
Senate Finance Chairman Eric Tarr, R-Putnam, who was against a 5% cut, said he felt comfortable with a 2% cut after the Justice administration identified ways to reduce spending, specifically in the newly-created health departments. Tarr has been focused on increasing transparency within those departments’ spending, particularly in the Department of Human Services, which he said now had a $220 million surplus.
W.Va. House Minority Leader Del. Sean Hornbuckle, D-Cabell
“It’s been a challenge from the finance committee when you’re looking for budget reductions, they’re usually not forthcoming most of the time,” Tarr said. “They have assured us they know where to go in and grab those efficiencies.”
“That opportunity to reduce spending in order to cut taxes is there,” he added.
Democrats in both the House and Senate were cautious about a 2% cut, particularly because it has been tied to a reduction of money from the departments of Health, Human Services and Health Facilities.
“While we want to cut taxes, more work needs to be done to assure the public the timing of this cut is fiscally responsible and to what extent are we going to lose other vital services to fund this?” said Del. Sean Hornbuckle, D-Cabell. “Through testimony, the potential impact to DHHR wasn’t able to be answered.”
In the Senate, Sen. Mike Woelfel, D-Cabell, worried that cuts to the health departments’ budgets would create future problems for the next governor’s administration.
“At the 11th hour, we’re going to find this money, we’re going to cut the taxes, then we’re going to hamstring — it seems to me — the new governor … governor [Justice] won’t even be here then,” Woelfel said.
Tarr said the next governor would inherit a flat budget with administrative reductions that saved the state money. “This doesn’t hamstring the next governor,” he said. “That was one of the things we were adamant about. It had to come from a reduction in spending.”
The House still has to approve the proposed 2% personal income tax reduction.
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