FILE - West Virginia welcome sign

A West Virginia welcome sign.

(The Center Square) – The West Virginia Senate passed amended versions of bills to enact the state budget and significantly reduce the income tax, which will be sent back to the House with the amendments.

Both chambers of the state legislature and the governor’s office agree with the general goal of House Bill 3300, which is to eventually phase out the income tax. With the session ending this Saturday, lawmakers continue to work on an agreement that Gov. Jim Justice would be willing to sign.

The Senate-amended version would cut income taxes by $818 million in the first year, effective Jan. 1, 2022. To offset some of these losses, it would increase the sales tax from 6% to 8%, which would include the purchase of soft drinks and prepared meals if passed. The legislation would maintain exemptions for groceries, but would end exemptions for certain professional services, such as certain forms of advertising.

Cigarette taxes would nearly double, increasing from $1.20 per pack to $2.20 per pack, and coal, oil and gas would be taxed through a tiered severance tax system. The bill also allocates money from the Rainy Day fund and some of the new tax money to create the S.A.F.E.R. fund. When this fund reaches $100 million in the course of a year, the state will use that money to pay for additional income tax reductions. $100 million in the fund would allow for an additional 2.5% reduction in the income tax.

The legislation would also include $40 million worth of rebates for people earning $35,000 per year or less.

In the original House-passed legislation, the income tax would not see a large cut immediately; rather, it would reduce the tax by $150 million annually until the tax is gone. The version passed by the Senate incorporates some of the governor’s priorities, which included a large income tax reduction in the first year. In the governor’s version, taxes would be reduced by $998 million in the first year, but would require further legislative action to completely eliminate the tax.

Both the House’s and the governor’s versions also broadened the state’s sales tax.

Lawmakers also have to reach an agreement on House Bill 2022, which enacts the state budget. The Senate amended the budget bill to restore funding to West Virginia University, Marshall University and West Virginia Public Broadcasting. The 2021-2022 budget will cost about $4.56 billion.

Staff Reporter

Tyler Arnold reports on Virginia and West Virginia for The Center Square. He previously worked for the Cause of Action Institute and has been published in Business Insider, USA TODAY College, National Review Online and the Washington Free Beacon.