About four months out from an election that could make him West Virginia’s next U.S. senator, Gov. Jim Justice on Monday announced that the state has hit the trigger to phase out its personal income taxes while also directing the Legislature to convene for a special session to increase those tax cuts by another 5%.
The tax cuts that were triggered this week are based on revenue collections from fiscal year 2024, which came about $826 million above estimates. They will be enacted between 3% and 4%, though details for exactly what they will look like will be released on July 11, according to a news release.
“We’ve got another surplus of numbers that are just un-flat-believable in every way,” Justice said. “$826 million … today, with the tax cuts that we have in place and all that has been done, another $826 million. If you don’t believe that that’s a miracle from God above, you got something wrong with you …”
According to an analysis from the West Virginia Center on Budget and Policy, the average West Virginia family will see about 85 cents per week from these cuts, or about $44 per year.
“When you look at the loss of child care subsidies or increases in the price of tuition, that amount of money is not going to address all of those needs,” said Kelly Allen, director of the center. “That’s too small for most families to notice or for it to make a difference in their lives. Contrast that with the paralysis this has caused at the Legislature and the collective impact on the state budget is huge while it’s so minimal for our families.”
To date, no replacement revenue stream has been created or announced to help fill what will end up being a decline in the state’s income due to these cuts. The tax cuts that are already set to take place — and the larger ones the governor said Monday he wants to see — will also occur permanently year over year, presenting a long-term decline in the state’s largest general revenue stream.
“There are still so many needs that are going unmet in this state and now, to promise additional tax cuts when that is still happening, well it’s reckless,” Allen said.
In his announcement Monday, Justice said he would also ask lawmakers in any special session call to — “first and foremost” — pass the child care tax credit he proposed during this year’s regular session. The proposal would create a tax credit equal to 50% of the allowable federal child and dependent care credit. It would benefit more than 16,000 families, according to the governor’s office.
“It was $4.2 million,” Justice said. “It’s next to nothing. But do you not understand that really and truly what we need in this state now is young people? We need people with young families that go to our schools and all that stuff.”
For Allen, the governor calling for the child tax credit while simultaneously lauding a tax cut that could total less than $50 annually for most families and asking for another cut presented somewhat of a disconnect between himself and the needs of the state.
“It struck me that there is all this work being done to get Medicaid back to pre-pandemic levels, to ensure child care doesn’t lose ground and many other things,” Allen said. “It’s hard to focus on those things and prioritize them while talking about tax cuts.”
Senate Finance Chair Eric Tarr, R-Putnam, said in a statement Monday that the state is “on track” with spending forecasts and that he “expect[s]” to see further tax cuts come in the future. He did not comment specifically on whether doing so would be feasible in a special session this year.
“Regarding the Legislature, controlling spending growth and investing in ourselves has been the practice that helped us here, and will continue to decrease demand on West Virginia tax payers,” Tarr said. “I’m beyond excited to see so many of our ideas and efforts validated by West Virginia’s growth.”
Justice urged state lawmakers to not “be afraid” about enacting the further cuts.
“I’m going to challenge you in every way to find some way, somehow, if it can be done and still minding the store in absolutely the most prudent way we possibly can,” Justice said. “But for God-sakes-a-livin’, don’t be afraid. Don’t be afraid.”
Justice acknowledged that work will need to be done later down the line to “stabilize ourselves and keep ourselves going” if legislators do increase tax cuts or dip into the state’s income tax reserve fund to do so, which he specifically outlined as an option on Monday.
That work, however, and any of the repercussions that come with it will likely not be faced by Justice as he is seeking a six-year term in the U.S. Senate.
“The governor is on his way out the door so any consequences of current and additional tax cuts will really be borne by the next governor and the next legislature,” Allen said. “This governor has a history of not paying enough attention to the future impacts of policy decisions … we haven’t seen a six-year spending forecast in years, and that used to be the norm. Legislators are now being asked to enact additional tax cuts without any future information on the spending needs of the state.”
Justice said the special session call could come in August or September. It would be the second one called since the regular legislative session ended in March.
In May, Justice called lawmakers for a special session to address budget issues. During the three-day session, lawmakers passed a bill giving more than $180 million to the Department of Human Services. Child care was not included in the call for that session.
In a statement, state Democratic Party Chairman Mike Pushkin criticized Justice for not saying where the additional 5% in income tax cuts would come from. He said that the state needs “real, actionable solutions to the state’s most pressing problems rather than short-term political maneuvers.”
“Jim Justice is using tax dollars as if they were an extension of his campaign committee,” said Del. Pushkin, D-Kanawha. “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. This isn’t a tax cut; it’s an attempted bribe.”
