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Final week of the session

Here we are, the final week of the 2021 legislative session. Today is day 55 and lawmakers are prepared to power through until the gavel comes down at midnight Saturday, April 10.

I feel somewhat redundant here, but once again all eyes are on House Bill 3300, the current vehicle being used to reduce and phase out the personal income tax.

Last week, we talked about the House version of the personal income tax plan, which differs greatly from the plan submitted by Gov. Jim Justice in House Bill 2027 and Senate Bill 600. Both bills are essentially dead, though someone could always amend the provisions into HB 3300, which will be on amendment stage in the state Senate today.

In this retconned tale of Goldilocks, Justice believes the House’s version of tax reform is too cold, the Senate’s version of HB 3300 is too hot, and naturally he thinks his version of the personal income tax plan is just right.

I talked with the governor last week and he is adamant his plan is the correct route: the one he believes that puts money in people’s pockets even after the various sales tax and excise tax increases, the one that provides a rebate for people making less than $35,000 per year, and one that tells the world that West Virginia is serious about creating a better tax environment.

But again, he’s been selling his plan to the wrong crowd up to this point. It’s not to say he hasn’t been talking to lawmakers, but I also suspect he’s been more in coach-mode instead of politician-mode. Justice loves to say he’s not a politician and boy does that show.

Now, Justice is holding a summit at noon today to hammer out a deal between himself, the House and the Senate. The question is whether anyone will show up. Justice first announced the summit Friday on MetroNews Talkline and later during his COVID-19 briefing. The problem is he hadn’t told House and Senate leaders, who found out about the summit while trying to conduct their floor sessions Friday.

I didn’t get the impression talking to my sources in the House and Senate that lawmakers were happy about a noon summit when they’re also trying to get the remainder of legislation out the door by Saturday. It would almost make more sense to let the Senate pass its version of HB 3300 on Tuesday and let it go to a conference committee where the governor or his representatives can involve themselves in the negotiations.

Not to say that getting everyone into a room to hammer out a compromise is a bad idea. It’s actually an idea I specifically asked the governor about last week. I also had a similar email conversation with former senate president Bill Cole. It seems like everyone is on board with the core mission of personal income tax reform and phase-out, but all sides have returned to their various corners. Everyone is going to need to give a little — the governor, lawmakers, the business community, etc. — to make a bill possible in time for the end of session.

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The Senate plan in many ways is meant to be a hybrid of the governor’s and the House’s personal income tax plans. Yet, in many ways it is much more extreme with its tax increases to offset the loss of revenue from reduced personal income tax rates.

The Senate plan would reduce personal income tax rates by more than 50 percent, including for small businesses and sole proprietorships, but not for investment income. The plan would reduce revenue from the personal income tax by $1.09 billion.

To pay for the personal income tax cut, the Senate version of HB 3300 would raise the consumer sales and use tax from 6 percent to 8.5 percent. It would also remove sales tax exemptions for services commonly used by businesses and tax some at lower rates.

Other tax increases in the Senate version include reinstating the food tax at 2.5 percent, taxing prepared food at 8.5 percent, a 4.3 percent tax on short-term lodging, an 8.5 percent tax on contingency-based legal settlements and the creation of a new Lottery scratch-off game.

Justice made it clear to me he would not support the Senate plan, especially since it provides no rebate for those making less than $35,000 and it includes the return of the infamous food tax on groceries.

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Last week I posited that there could be a special session on tax reform if a deal doesn’t come together by the end of session. Based on my conversations with Justice, I’m now not so sure of that. The governor believes the time is now and the longer it takes, the more the opportunity slips from the state’s fingers. If a deal can’t be reached, then so be it.

But I’ve seen crazier things happen during a legislative session. Perhaps a deal can be worked out in the final days and even the final hours. The future remains unwritten.

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