(The Center Square) – West Virginia Gov. Jim Justice introduced legislation that would slash state income taxes by 60% in one year, but his plan to raise several other taxes has received some skepticism from the political right.
Under the proposed legislation, all filers would see a 60% tax reduction on income from wages, salaries, pensions annuities, IRAs, social security and unemployment benefits. Certain types of income are excluded, including Schedule C business profits, rent earnings, capital gains earnings and farm income. The bill also includes a tax rebate check for those earning $35,000 or less per year.
The plan includes more than $1 billion in tax cuts and more than $50 million in rebates, but also includes more than $900 million in tax increases in other parts of the code. This leaves more than a $150 million gap that would need to be made up by spending cuts.
“We have all the building blocks in our state,” Justice said in a statement. “We have an economy that’s truly on the launchpad, some of the greatest people you’ll find anywhere, who are smart, kind, faith-based, and hardworking people, along with four of the best seasons on earth with more natural beauty than you could possibly imagine. But now we need to make a big move to put us over the top, so when people look at another population map 70 years from now, West Virginia will be right up there with the very top states in the country.”
The largest monetary increase would come from increasing the sales tax by 1.9 percentage points from 6% to 7.9%. It would also expand the base of the sales tax to include legal services, accounting services, sales of lottery tickets, computer hardware and software and other things.
A luxury tax would be implemented on the sale of items purchased that cost $5,000 or more. An item that costs between $5,000 and $10,000 would receive a 3% tax. More expensive items would also receive luxury taxes that decrease as the item gets more expensive.
“The plan intends to promote growth and provide a new frontier for West Virginia business, Jessica Dobrinsky, a policy development associate at the free-market Cardinal Institute, told The Center Square.
“However, the essential part of any tax reform is reducing spending,” Dobrinsky said. “Since 2000, the state has increased spending by 160%, quadrupling the rate of inflation simultaneously. Despite the mass exodus of residents from the state, the size of state government continues to grow. Any reformation of the personal income tax should make its primary focus cutting spending and reducing government waste.”
Dobrinsky said the non-profit applauds the income tax reform and awaits further details. She said states with no income tax experience faster wage growth and population growth, and that it would benefit the state if done in a responsible and pragmatic way.
The plan would also generate additional revenue by increasing taxes on tobacco products and alcohol purchases. Cigarettes would be taxed $2.25 per pack, e-cigarettes at 75 cents per milliliter and other tobacco products at 19.5%. The beer barrel tax would increase to $29.25 per barrel, the wine tax would change to $4 per gallon and the liquor tax would change to 39.25%.
Other changes would include a tax on soft drinks: 6 cents per 16.9 fluid ounces or the fraction thereof, $4.80 per gallon on syrup and 6 cents for every 28.35 grams of dry mixture. It also includes tiered taxes on natural gas and coal, which would increase state revenue.