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Gov. Jim Justice, right, looked on as Department of Revenue Secretary Dave Hardy explained how a proposed 10 percent personal income tax cut would work Wednesday. (Photo courtesy of the WV Governor\u2019s Office)<\/p>\n
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\n\t\t\t\t\t\t\t\tCHARLESTON \u2014 Citing West Virginia\u2019s record-breaking $1.3 billion tax revenue surplus, Gov. Jim Justice announced his intentions to put a bill before the Legislature cutting the state\u2019s personal income tax rates by 10 percent.
\n\u201cAs a result of our unbelievable economic growth, I\u2019m announcing I will propose a 10 percent personal income tax cut as an aggregate,\u201d<\/span> Justice said during a special announcement Wednesday afternoon from the State Capitol Building. \u201cWe want to provide West Virginians with a permanent tax cut for permanent relief and not a temporary stimulus.\u201d<\/span>
\nJustice said he would call a special session coinciding with legislative interim meetings scheduled for Sunday, July 24, through Tuesday, July 26, and introduce a bill to cut the personal income tax.
\n\u201cI have been a believer in forever and a day that the thing that would absolutely drive population to our state is the reduction and the elimination of our personal income tax in West Virginia,\u201d<\/span> Justice said. \u201cThat is the key to Emerald City.\u201d<\/span>
\nJustice said the personal income tax cut will be tiered, though it was unclear how the individual rates will be cut. Residents earning more than $60,000 pay 6.5 percent under current rates, while those earning less than $10,000 have a 3 percent personal income tax rate.
\nThe tax cut will be retroactive to Jan. 1, and the cost of the tax cut is $254 million. Justice said the goal is to provide tax relief to all West Virginians while also creating an incentive for job creators to come to West Virginia.
\n\u201cWe\u2019ll try to make it as fair as we possibly make it, remembering that we want real job creators to bring more and more opportunities to the folks of West Virginia,\u201d<\/span> Justice continued. \u201cTo do that, we can\u2019t ignore the people on the higher ends because we are trying to attract them to bring their businesses here.\u201d<\/span>
\nThe last time that the personal income tax rates were changed was 1987 during the term of the late Republican governor Arch Moore.
\nCutting and phasing out the personal income tax has been a battle the last two years. An attempt to phase out the personal income tax during the 2021 legislative session failed after two sides \u2014 the Governor and state Senate Republicans on one side and Republican members of the House of Delegates on the other side \u2014 could not agree on the best approach for the phase out, resulting in its demise.
\nEarlier this year during the 2022 legislative session, House Finance Committee Chairman Eric Householder, R-Berkeley, proposed a similar tiered 10 percent personal income tax cut. That bill passed the House but was never taken up in the state Senate.
\nA line item in the surplus section of the new fiscal year 2023 budget that created a $250 million fund for possible shortfalls to cover the changes to the tax rates was also vetoed by Justice.
\nDave Hardy, the cabinet secretary for the state Department of Revenue, said their 10-percent plan differs from the Householder plan. State revenue officials feel more comfortable now with the tax cut than six months ago now that they have more data going into the new fiscal year.
\n\u201cWe have about six months more of data on our financial performance than we had back in March and even back in February,\u201d<\/span> Hardy said. \u201cBack early in the session in January, we were not in a position to even consider \u2026 some sort of tax cut of any sort.\u201d<\/span>
\nThe state also didn\u2019t want to run afoul of provisions in the federal American Rescue Plan Act and U.S. Treasury rules that prohibit states from using ARPA dollars for direct or indirect changes in tax rates. Two federal courts \u2014 including a case won by Attorney General Patrick Morrisey \u2014 have stayed those rules. West Virginia received $1.35 billion in direct ARPA funding.
\n\u201cIt violated all the ARPA restrictions. That shot it right down,\u201d<\/span> Justice said.
\nWest Virginia ended fiscal year 2022 at the end of June with $5.9 billion, 43.6 percent more than the $4.6 billion estimate amended in January by the state Department of Revenue. This leaves the state with $1.3 billion \u2014 the largest state revenue surplus ever recorded.
\nTax revenue for fiscal year 2022 through the personal income tax and the consumer sales and use tax broke all previous state records. Hardy said that the state saw 23-percent growth in net revenue growth during the fiscal year, or $1.1 billion, compared to $317 million in net revenue growth between 2009 and 2018 combined.
\n\u201cIn one year, we grew three-and-a-half times the revenue that it took 10 years to gain,\u201d<\/span> Hardy said.
\nRevenue from the severance tax on coal and natural gas represented 13.4 percent of total tax revenue into the general revenue fund \u2014 the highest percentage the state has seen. Severance tax revenue for the last fiscal year of $730.9 million was 121.5 percent more than the $330 million revenue estimate for $400.9 million in surplus. Hardy said 35 percent of severance revenue was from coal, 48 percent was from natural gas, and 17 percent was from other sources, such as oil.
\n\u201cThat indicates that our severance tax is growing while at the same time our other revenue sources are growing as well,\u201d<\/span> Hardy said. \u201cThis is another indicator that our economy and our energy sector is diversifying.\u201d<\/span>
\nSteven Allen Adams can be reached at sadams@newsandsentinel.com
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