House Finance hearing on income tax plan yields mostly negative comments

David Beard, The Dominion Post, Morgantown, W.Va.
Fri, March 26, 2021, 12:01 AM·4 min read
Mar. 26—MORGANTOWN — The House Finance Committee's income tax reduction plan — HB 3300 — is up for passage on Friday.

The sentiment among those who turned out for a Thursday public hearing on the bill — lobbyists and a few members of the public — was overwhelmingly against it. But public hearings almost never sway any votes and a majority of delegates may prefer this plan to the governor's, if they favor any plan at all.

Finance originated the bill, which is on third reading Friday with several proposed amendments pending.

Gov. Jim Justice wants to cut the personal income tax by 60 % in 2022 and make up budgetary shortfalls with a variety of tax hikes in other areas. The House Finance plan moves more slowly and relies solely on anticipated growth, with no new taxes or tax hikes.

The head count at the hearing was 23 against, four in favor. Some of those against favor an income tax reduction but oppose this approach.

Most opponents said they fear that a plan with no means of making up lost revenue will lead to budget holes and probable service cuts.

Some cited examples of cuts that House Majority Whip Paul Espinosa included in a survey email to GOP delegates to see what kind of cuts they might be willing to stomach under Justice's plan. Many have taken the survey points as definite statements of what will be cut.

Some opponents said the House plan would initially save the average West Virginian about $14 a year.

Jessica Ice, with West Virginians for Affordable Healthcare, said saving those people a few dollars a year won't help much when their health care programs get trimmed. "It's draconian. It's unnecessary. It looks like death by a thousand cuts."

Dale Lee, president of the West Virginia Education Association, said that the charter schools bill, approved by the governor earlier this month, and education savings account bill awaiting his signature, public schools stand to lose a lot of money. This would take away more. "We should be looking out for the majority of our students, not a select few."

Barry Holstein said he prefers the governor's plan because it moves faster. And it shifts from a mandatory tax on income to a voluntary tax on spending, much of which will be paid by travelers from out of state. "We simply cannot wait a decade to make West Virgnia a more attractive place for people to move to."

On the positive side, Jessica Dubrinski, with the Cardinal Institute, said income tax affects a person's ability to save and invest money. HB 3300 enables people to use more of their own money as they see fit. It's the "answer for more prosperous and fiscally empowered Mountaineers."

The West Virginia Chamber of Commerce is one of the business groups that opposes Justice's plan because it doesn't cut taxes for sole proprietorships and other small businesses.

But chamber President Steve Roberts spoke in favor of this one. It applies to all taxpayers and doesn't pick winner and losers, he said. The tax rate reductions are significant. "It sends the sends signal West Virginia wants a smaller share of a family's earnings."

The House Finance plan would start Jan. 1, 2022. Each income tax bracket would see a tax-rate reduction. At the same time, the state tax commissioner would look at tax year 2021 collections and use that figure to reduce tax year 2023 collections by $150 million and calculate tax year 2023 rates accordingly.

That process will continue in subsequent years — calculating new rates for the coming year based on prior-year revenue — until the income tax is phased out.

But the plan also includes an accelerator: The Income Tax Reduction Fund (ITR Fund). Additional revenue from a variety of existing taxes would be channeled into the fund, which is intended as a safeguard against economic downturns.

When the ITR Fund reaches $400 million, $100 million would be transferred from it into the General Fund. This also triggers a new calculation of the tax-rate reduction based on reducing income tax revenue by $250 million.

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