Income tax bill differs from Justice’s proposal, fully eliminates West Virginia income tax gradually

(The Center Square) – Legislation passed in the West Virginia House of Delegates would fully eliminate the state’s income tax, which differs from Gov. Jim Justice’s proposal to eliminate 60% of the income tax and then fully repeal it at a later date.

House Bill 3300, sponsored by Del. Eric Householder, R-Berkeley, would gradually cut the state’s income tax by $150 million every year until it is fully eliminated. Depending on revenues, this would fully eliminate the tax in six or more years.

This differs from the original income tax legislation proposed by the governor, which would cut the income tax by 60% on day one and raise consumption taxes to offset some of the losses. It would leave a $150 million gap, which would need to be addressed by spending cuts. The bill does not address the final 40% of the income tax, but is designed to be the first step in fully repealing the income tax, which another bill would complete at a later date.

Householder’s legislation does not include any tax increases, but lawmakers would have to find ways to offset some of the losses to keep up with spending demands. The income tax accounts for half of the state’s yearly revenue.

“The House’s bill would cut the income tax by $150 million compounded each year for pass-through businesses and earned income until the personal income tax is eliminated,” Jessica Dobrinsky, a policy development associate at the Cardinal Institute, told The Center Square. “This plan would eliminate the income tax in 6+ years, dependent on the economy’s response in the formation of the $150 million triggers.”

“On the other hand, the Governor’s proposal does not repeal the income tax in its current iteration,” Dobrinsky said. “Instead, the bill reduces the income tax rate by 60% on day one with reductions in wages, retirement, and unemployment income. The current bill does not list any plan to reduce the rate by the final 40%. Instead, another piece of legislation would be needed to reduce the final rates. Revenue offsets in the form of a luxury tax, increased beverage tax, and increase in beer/wine taxes would raise about $902.6 million with the income tax reduction totaling $1.09 billion.”

The House’s version of the income tax repeal has been introduced into the Senate and referred to the Finance Committee.

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