(The Center Square) – As the West Virginia legislative session came to a close, lawmakers successfully passed a budget bill, but failed to reach an agreement on how the state should reduce and eventually eliminate its income tax.
The nearly $4.5 billion budget passed both chambers of the General Assembly and has been sent to Gov. Jim Justice’s desk for either his signature or amendments. The bill, as passed, cuts about $73 million from the governor’s proposal.
Most of the budget debate surrounded a 1.5% cut to higher education. Although the state has a surplus, the earlier budget proposals tried to account for a proposed income tax reduction, which lawmakers never reached an agreement on. Gov. Jim Justice and lawmakers still intend to work on a compromise.
Although the governor and both chambers of the legislature agreed on reducing the state’s income tax, the three took different approaches.
The governor’s version included a massive income tax cut of nearly $1 billion within the first year, but did not draw out how the state would eliminate the rest of the tax. The governor’s proposals, just like the House and Senate proposals, included changes to the income tax to offset some of the revenue losses, but still left an overall decrease in state spending.
A House-passed version of the bill would have reduced the income tax by $150 million annually until the income tax was gone, but would not include an immediate large cut. The Senate amended the legislation to pass a bill that would include an immediate $818 million cut in the first year and would have created a fund using rainy day money and other revenue sources to pay for later income tax cuts.
The Senate sent that version to the House, but the House rejected it unanimously. Justice praised the Senate for its amendments and criticized the House for failing to send the bill to his desk.
“As it currently stands, it is evident that both chambers of the West Virginia legislature and Governor Justice have different visions on eliminating the income tax correctly,” Jessica Dobrinsky, a policy development associate at the free-market Cardinal Institute, told The Center Square.
“With such distant visions, it is vital for the three groups to come together and find a compromise,” Dobrinsky said. “To create comprehensive, successful tax cuts, the Cardinal Institute has continuously stressed our four-step plan for tax cuts: have a plan to balance the budget, reduce government waste, phase in tax reductions, and set reasonable expectations.
With the legislative session coming to a close, lawmakers will either have to wait until next session to pass an income tax reform bill or continue working on an agreement in a special session.