PARKERSBURG — As lawmakers gathered in Parkersburg for September legislative interim meetings Monday, Gov. Jim Justice made good on a promise last week to announce a special session on his personal income tax cut plan, laying down the gauntlet for lawmakers.
In a press release and video announcement Monday afternoon, Justice said he will call lawmakers into special session at noon Monday, Sept. 30.
Justice announced last Wednesday that he would announce a special session Monday for the end of September to consider an additional 5% cut to personal income tax rates and a tax rebate for child care.
“I promised you that today, I would give you the date of when we were going to call the Legislature back into special session,” Justice said. “We’ve worked with the legislative leadership over the weekend. We’ve worked countless days in the last week and everything. Really and truly, that date seems to work the very best for everybody.”
Justice first proposed a 5% additional cut in personal income tax rates in July following the end of fiscal year 2024. It would return approximately $115 million to taxpayers if approved by lawmakers. Justice said the special session will include supplemental appropriations to spend some of the $562 million in unappropriated surplus from the end of fiscal year 2024 after expenses and $80 million in unappropriated monies for the current fiscal year.
Justice said he would also introduce a child care tax credit similar to one he offered during the 2024 legislative session. That bill would have provided a credit against the personal income tax in the amount of 50% of the allowable federal child and dependent care credit, effective retroactively to Jan. 1. If passed, the credit could have returned up to $4.2 million to eligible taxpayers according to a fiscal note from the state Department of Revenue.
“I promised you I would stand up and fight like crazy for you in trying to get another 5% tax cut for you,” Justice said. “I promised you I would try to help out with child care and absolutely try to get our tax break across the finish line with child care. There are absolutely supplemental appropriations that need to be done, and we need to get the money out the door and get these projects moving.”
That cut would be on top of a 4% personal income tax cut going into effect in January 2025 based on a formula and trigger mechanism put into place in 2023. The 4% tax cut will return approximately $92 million to taxpayers beginning next calendar year.
The personal income tax cut formula and trigger was part of House Bill 2526 that passed during the 2023 legislative session. HB 2526 cut personal income tax rates by 21.25%, returning approximately $483 million to taxpayers.
That number doesn’t include the additional cuts in HB 2526, including the tangible personal property tax rebate on motor vehicles and other tax breaks. According to state Department of Revenue Deputy Secretary Mark Muchow, the entire tax reform package in HB 2526 returns approximately $800 million to taxpayers annually.
While Republican lawmakers supported HB 2526 and support the idea pf phasing out and eliminating the personal income tax over time, some lawmakers have expressed concern about a new 5% personal income tax paid for out of available unappropriated tax dollars and surplus tax collections from the previous year.
State Senate Finance Committee Chairman Eric Tarr, R-Putnam, has said that any further tax cut should come with an equal cut in state government spending. Speaking to Deputy Department of Revenue Secretary Mark Muchow Monday morning during a meeting of the Joint Standing Committee on Finance at the Judge Donald F. Black Courthouse Annex, Tarr said he is also concerned with cutting taxes faster than the growth in government expenses expected over the next several fiscal years.
The Legislature is required to rely on revenue estimates from the governor and the Department of Revenue when crafting the general revenue budget each fiscal year. But for years, the Governor’s Office has submitted flat budgets with tax revenues underestimated, resulting in the state ending each fiscal year with hundreds of millions in surplus tax dollars.
During an August meeting of the Joint Finance Committee, Muchow told lawmakers to expect surpluses at the end of future fiscal years to be modest compared to recent years. According to data from the Senate Finance Committee for the first two months of fiscal year 2025, tax collections have been under estimates.
“I guess what gives me a little bit of concern then on this (is) if this is a first estimate…consumer or personal income tax is not only below estimates, but I would say it’s also below inflationary growth as well as the sales tax,” Tarr said. “I’ve got some hesitations.
“The governor is coming in suggesting another $110 million in reduction of revenue on top of that revenue drop,” Tarr continued. “Should this Legislature have concern with that?
According to lawmakers, there has been no discussion with Justice or the Governor’s Office regarding the specifics of what Justice’s tax cut proposal looks like.
“Nobody knows at this point,” said House Finance Committee Chairman Vernon Criss, R-Wood. “We’ll look at whatever he brings to us at the time whenever he decides to do that.”
“We haven’t seen what the proposal looks like,” said House Minority Leader Sean Hornbuckle, D-Cabell. “We’d like to wait till we see it to understand it a little bit more, but right now the jury’s still out on the income tax cut. We have to be fiscally responsible in making sure that our state can swallow that right now.”
The Legislature met in special session in May to restore money cut from the fiscal year 2025 budget now in effect after the state avoided the possibility of being forced by the federal Department of Education to spend $465 million due to now following requirements for use of federal COVID-19 education dollars.
Justice had planned to call lawmakers into special session in August, with legislative interim meetings scheduled later in August to accommodate a possible special session. Criss said a special session is needed to begin making supplemental appropriations.
“Obviously, the lead is on the what his proposal will be for the 5%, but the other things that should be on the agenda would be any of the other supplementals he has decided we need to take money towards,” Criss said. “We’re still interested in infrastructure projects, especially water and sewer and highways and internet. We want to continue to do that.”
Hornbuckle and Del. Joey Garcia, D-Marion, both said that the governor and lawmakers need to consider appropriating more funding to the Child Care Assistance program.
The state Department of Human Services told lawmakers during April interim meetings that the department would need approximately $23 million to fund the Child Care Assistance program at the current rate based on enrollment beginning in September for the remaining 10 months of the current fiscal year.
Justice and DoHS announced in August that the program has the funding it needs to fund child care centers using the enrollment formula through the end of December, but that means the program will need an additional $13 million for the last half of the current fiscal year.
“Obviously, we hope that child care is number one,” Hornbuckle said. “For eight years, we have heard the governor talking about working in a bipartisan way working together to fix issues, but we have still yet to see that, especially when it comes to child care.”
“With child care facilities, I don’t see anything in the governor’s plan that’s actually going to help create a strong foundation so that other child care facilities won’t close, and that we can open up new ones so there’s better access,” Garcia said. “I am really confused as to the governor pulling this right now with apparently no consensus from anybody else in the Legislature.”