W.Va. Gov. Jim Justice proposes eliminating the state income tax

Also proposes a sin tax on products like cigarettes and soft drinks
Published: Feb. 10, 2021 at 7:50 PM EST
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CHARLESTON, W.Va. (WSAZ) – West Virginia Gov. Jim Justice on Wednesday night delivered his fifth State of the State address, outlining several budget priorities.

“I am asking all of you to join me in repealing income tax in the state of West Virginia,” the governor said, saying it could be “cut by half right out of the gate.”

Justice said income tax currently generates about $2.1 billion in funding for the state, or about 43 percent of the yearly budget. He proposed covering this gap by imposing a wealth tax for the state’s highest earners along with other budget changes.

He proposed raising the sales tax by 1.5 percent, creating a sin tax on products such as cigarettes and soft drinks and implement a tiered severance tax system for oil, gas and coal.

“If the border counties are concerned that someone is going to go across and buy soda pop or they’re going to buy cigarettes across the border, I would say to them, ‘those people across the border are going to come to you to live,’ ” Justice said. “Your stores are going to be filled, but you can’t imagine the opportunity is right here right now.”

House Minority Leader Doug Skaff said the proposal does not make economic sense. He tried doing the math and the figures did not add up, even with the $25 million in budget cuts Justice said would need to be made. Skaff said eliminating the income tax would shift the financial burden to people who are least prepared to afford it.

“What we didn’t hear is how we’re going to reverse the trend of losing 60,000 people over the past four years,” Skaff said. “There’s nothing about how we’re going to keep our best and brightest here in West Virginia, talk about seniors leaving our state in droves. There’s no specific examples. The money just didn’t add up.”

Justice said there is currently a $464 million cash surplus, and he proposed carrying over the state’s rainy day fund to cover any problems as they wait for other revenue streams to grow.

“Now, what’s happened is you have a surplus of cash that is extraordinary,” Justice said. “We continue to grow it. I would not spend it. I would set it into a bucket, a rainy day fund bucket, for the elimination of our income tax or any shortfalls in the elimination of our income tax.”

Justice said his goal is for a flat, no growth budget for the next three years. This will help cover the loss of the income tax revenue until more residents and businesses hopefully move to the state to create additional funding streams.

“That’s effectively a budget cut in itself,” House Speaker Roger Hanshaw said. “That inflationary growth, as I recall, is around 130 million a year. By doing nothing more than holding steady, that’s effectively a nine digit budget cut in its own right.”

Hanshaw would not commit to passing the income tax changes during the current 60-day legislative session, calling it a “lofty goal” that is not going to happen overnight.

“It’s really just a fundamental question of what our priorities are and we’re going to have to be thinking about that over the course of the next 60 days,” Hanshaw said.

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