Justice Reveals More on Income Tax Cut Plan | News, Sports, Jobs

Gov. Jim Justice, seen here at Wednesday’s State of the State address, offered more information Thursday on his tax cut proposal that he introduced Wednesday.

CHARLESTON – Gov. Jim Justice and officials with the West Virginia Department of Revenue provided the public additional details on their proposal to cut personal income tax rates by 50% over the next three years.

Justice and Dave Hardy, cabinet secretary for the Department of Revenue, held a virtual briefing with reporters Thursday from the Capitol.

“We have a real plan. That’s what you hired me for, to have a real plan,” Justice said. “We’ve come a long, long, long way and things are absolutely cooking in West Virginia.”

During his State of the State address Wednesday night, Justice proposed a 50% reduction in the personal income tax over a three-year period, beginning with a 30% cut during the current fiscal year retroactive to January when the 2023 tax year began.

Another 10% cut would take place beginning in fiscal year 2024 in July, taking the total cut to 40%, followed by another 10% cut in fiscal year 2025 when the full 50% cut would kick in.

According to Hardy, the 30% personal income tax cut would return $163 million to taxpayers during the last half of the current fiscal year ending in July. More than $1.085 billion would be returned to taxpayers in fiscal year 2024, with $1.229 billion returning to taxpayers in fiscal year 2025 when the full 50% cut kicks in.

“Think of the dollars you’ll be putting in your pocket,” Justice said. “You’ll spend those dollars, and that helps us, too. The multiplier effect on those dollars is off the chart.”

By tax year 2025, the plan would cut the state’s top income tax rate of 6.5% to 3.25%. Hardy said the cuts would make the state more competitive with neighboring states.

“We are going to be lower than all the states surrounding us, again, creating an incentive for people to move into West Virginia and avail themselves of the financial success of the proposal we have here,” Hardy said.

West Virginia netted $552 million in excess tax revenue after ending fiscal year 2022 last July with more than $1.3 billion in surplus. The state has already collected more than $833 million in surplus tax revenue for the current fiscal year and is expected to end the fiscal year in June with more than $1.7 billion in surplus tax revenue. These surpluses are providing the state the opportunity to cut taxes, Justice said.

Justice’s tax cut proposal, House Bill 2526, was introduced in the House of Delegates on Thursday. The bill also creates a $700 million reserve fund to be used to cover shortfalls in personal income tax revenue due to future recessions or other economic downturns.

“This is a very carefully thought out and cautious plan,” Hardy said. “If these projections, and these are conservative projections, are right, we won’t need that $700 million. It will be used for something else. Perhaps it will be used to fund another tax cut. But to be absolutely cautious, we proposed to set aside $700 million as a reserve.”

During the previous fiscal year, personal income tax collections were $2.502 billion, making up more than 42% of the $5.887 billion the state collected in the general revenue fund that year. Phasing out the personal income tax has been a goal of Justice over the last several years, including pushing for a 10% personal income tax cut in July.

“Absolutely the goal is zero,” Justice said. “The faster that we can layer in more and eliminate our personal income tax, absolutely this state will grow in population and grow in business opportunities like you can’t imagine.”

Justice presented lawmakers Wednesday night another flat budget for fiscal year 2024 beginning in July, coming in at $4.884 billion, 5% more than the $4.645 billion general revenue budget for the fiscal year 2023 passed by lawmakers last year.

According to projections from the Department of Revenue, if the state maintains a relatively flat budget with modest 3% increases each fiscal year through fiscal year 2027, the state will continue to see surplus tax revenue exceeding $1 billion each fiscal year.