WV governor proposes cutting income tax in half, raising sales tax, creating wealth tax

(The Center Square) – During his State of the State address Wednesday evening, West Virginia Gov. Jim Justice laid out his tax reform recommendations, which include cutting the income tax in half for most West Virginians, increase the sales tax and create a wealth tax for large purchases.

With Republican supermajorities in both chambers of the General Assembly, lawmakers have indicated their intent to join nine other states in fully phasing out its income tax. Such a reform would completely overhaul the state’s tax system, which receives about $2.1 billion in income tax money, accounting for half of its yearly revenue.

Justice discouraged the General Assembly from passing a bill that fully eliminates the income tax immediately, but expressed his intent to take initial steps to get there. He suggested halving the income tax for low- and middle-income residents and cutting the income tax by one-third for the state’s wealthiest earners.

To account for the lost revenue, Justice encouraged several tax increases, which include a 1.5% sales tax increase on all taxable purchases and implementing a wealth or luxury tax on large purchases. He encouraged a tax increase on cigarette and soda purchase, which he said would help offset revenue losses and make the state healthier. He also suggested taxing professional services.

The governor’s plan would not require large spending cuts. Rather, he said this tax plan would only require about $25 million in cuts and freezing budget spending for the next three years. His 2021 legislative agenda also includes bills to incentivize businesses to move into West Virginia and to bring more remote workers into the state. All surpluses should be kept, rather than spent, to move into the state’s rainy day fund and be available in case there are any revenue shortfalls, he said.

West Virginia is currently growing its revenue at about $300 million annually and he said this will continue to grow if the state implements these reforms and effectively grows the economy by bringing in more businesses. When the economic growth kicks in, he said the state can then move to fully eliminating the income tax.

Justice said the state performed well last year with the influx of federal money and that the proposed $1.9 trillion stimulus package making its way through Congress will also help the state. However, he warned that the stimulus packages will stop and the state will fall back if reforms are not implemented.

“If everything just goes back to the way it was, I challenge every single one of you,” Justice said. “West Virginia will fall back into being West Virginia someday.”

The governor also asked the General Assembly to create two new agencies: one for tourism and another for economic development. The session began on Wednesday.

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