Quick take:
n West Virginia’s FY 2024 revenue surpassed expectations, triggering a 3% or 4% reduction in the personal income tax rate.
n Gov. Jim Justice aims for additional 5% cut, proposing to use surplus funds to mitigate revenue losses.
n Despite opposition, Justice plans to pursue further tax reductions, projecting savings exceeding $1 billion during his tenure.
CHARLESTON, W.Va. (WV News) — Despite some predictions to the contrary, West Virginia’s revenue collections from Fiscal Year 2024 were enough to meet the benchmark in last year’s tax reduction package, triggering an additional reduction in the personal income tax rate.
During a recent event held at the Culture Center in Charleston to celebrate the close of the fiscal year, Gov. Jim Justice announced collections signaled a cut to the PIT of 3 or 4% was in the works.
“You are triggering, right now, to an additional 3 or 4 — we don’t know which one it will be exactly — 3% or 4% reduction in your state income tax,” he said.
The exact figure will announced on Thursday, Justice said, when it will be known if state revenue collections exceeded the rate of inflation.
The 3% or 4% cut is double the cut of up to 2% State Revenue Secretary Larry Pack had told lawmakers they should expect.
Justice, who has long said West Virginia should join states like Florida, Texas and Tennessee in getting rid of its personal income tax altogether, also said he plans to ask state lawmakers to consider another 5% cut during a special session later this year.
“I want to call you back,” Justice said to the lawmakers in attendance. “I want to challenge you to somehow, someway try to do an additional 5% on the personal income tax. It’ll be tough, but there’s a way to do it.”
Adding up all of the cuts — a cut of 3% or 4%, plus another 5% reduction, on top of the initial reduction of 21.25% included in the original tax cut package — means a total reduction of more than 30% to the personal income tax over the course of just a few years.
The governor suggested lawmakers take funds from the state’s budget surplus and put them aside as a safeguard against the revenues that would be lost by putting further cuts in place.
“Calculate what that additional 5% reduction in income tax would cost and take double that from the surplus and put it in the income tax reserve fund,” he said. “It’ll protect you for at least two years.”
Pack has previously said for each 1% cut to the personal income tax rate, it is estimated to cost the state approximately $22 million in revenue. Using that math, a 5% cut would equate to about $110 million, and double that figure would be about $220 million.
Justice estimated he has overseen the enactment of more than 25 tax reduction measures during his tenure, which he said adds up to “over $1 billion” in savings for taxpayers.
Further reducing the personal income tax rate, along with “marching towards eliminating” it completely, will bring additional investments, projects and residents to the state, Justice said.
“Doing so will only bring more and more people to this incredible place and promote even more goodness,” he said.
West Virginia Sen. President Craig Blair, R-Berkeley, who was among a group of lawmakers who joined Justice onstage at the Culture Center, has previously expressed a desire to see the tax cut trigger delayed.
“How we set that trigger up was a mistake,” Blair said in March. “It needs to be adjusted so it’s one year out. Not so that it saves the state any money — that’s not it. It’s being able to have long-term budgets.”
According to the text of the initial tax package, House Bill 2625, on Aug. 15 of each year, the state revenue secretary must determine whether total adjusted general revenue fund collections from the preceding fiscal year are in excess of the inflation-adjusted base-year revenues.
These numbers are based on actual general revenue fund collections for Fiscal Year 2019, which were $4,293,884,754.
If the total fiscal year-adjusted general revenue fund collections from the preceding fiscal year are in excess of the inflation-adjusted base-year revenues, there will be a reduction in the personal income tax rates beginning the next taxable year.
To determine the amount of the personal income tax reduction, the fiscal year’s excess general revenue fund collections will be divided by the amount of the preceding fiscal year’s total personal income tax collections for all funds and will be rounded down to the nearest whole percentage.
The amount of the percentage of reduction will be applied equally across the tax rates applicable in the tax year.
Del. Mike Pushkin, D-Kanawha, chair of the West Virginia Democratic Party, released a statement criticizing the governor’s proposal.
“He has no plan for how to come up with the money it would take to further reduce taxes. He just feels like there’s a way to do it,” Pushkin said.
Justice, during a press conference in mid-June, said he would attempt to thwart efforts meant to delay further cuts from taking effect.
“I’m afraid that what we want to do is we want to say, for whatever the reason may be, ‘Let’s hold back and delay for another year,’ Justice said. “I absolutely am a believer that you continue on the pathway and you continue to give x-dollars back. I don’t know that we’ll get there, because I’m one-third of the deal. I don’t know if we’ll get there, but I’m going to try awful hard for us to get there at least in part.”
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