July 21, 2017
Senior Policy Analyst
July 21, 2017
West Virginia’s roller coaster ride of a session is nearing its tumultuous end. In a press conference this morning, Gov. Jim Justice announced that he will let the legislature’s most recent budget bill become law without his signature.
Late last week the House and Senate agreed on a $4.23 billion budget. Lawmakers reached an agreement in time to avoid a government shutdown that would have begun on July 1. While avoiding a shutdown is welcome news, the budget will be painful for many West Virginians because it relies on deep cuts to higher education and social programs, spending roughly $85 million less than in the current fiscal year. The budget does, however, preserve the state’s federal Medicaid match through the use of transfers and expected surpluses—this funding was in doubt throughout legislative negotiations.
Despite much discussion of tax “reform,” no tax changes were included in the final budget. Rather, transportation funding—which includes a 3.5 cent gas tax increase, a 1 percentage point vehicle sales tax increase (from 5 to 6 percent), and an increase in the annual vehicle registration fee (from $30 to $50)—was secured through separate legislation.
Few lawmakers are pleased with the outcome. Over the past few months, members of the Senate, the House, and the governor himself have expressed extremely different views on the best way to close the deficit and tweak the state’s tax system. These efforts, often referred to as “tax reform,” were anything but.
Notably, the slew of proposals originating in the Senate this session (and there were many) had one thing in common—they would reduce and ultimately eliminate the state’s personal income tax while expanding and increasing consumption taxes. The goal was a tax shift, not tax reform. These proposals would not only have resulted in massive budget gaps for the state years down the road, but would have tilted the Mountain State’s tax system in favor of the wealthiest at the expense of those with lower or more moderate incomes.
In criticizing the budget bill, Gov. Justice said that “all this [budget] does is kick the can down the road,” resulting in massive budget holes in out years. There is no doubt that the agreed upon budget does not solve the state’s fiscal problems, and that it will harm residents of the state, but it is disingenuous for the governor and lawmakers to assert that their proposals for tax “reform” would have done anything but worsen the state’s long-run revenue gap.
The “reform” proposals, which will likely appear again next session, would have left low- and middle-income earners paying more to finance tax cuts for the wealthy, while compounding the state’s long-run fiscal problems. These serious flaws should not be forgotten when the tax debate in West Virginia eventually resumes.