CHARLESTON, W.Va. (AP) — West Virginia Gov. Jim Justice on Wednesday proposed a permanent 10% reduction in the personal income tax after the state ended the fiscal year with a record $1.3 billion surplus.
The Republican governor said he plans to call a special session of the Legislature during its interim meetings from July 24 to 26 to address the tax cut. It's the third time a personal income tax cut has been proposed in the past year. The other two attempts failed.
Justice said it’s a way for residents to deal with inflation, including the high cost of gasoline, while hoping to lure more businesses into the state.
“I have been a believer for ever and a day, the thing that absolutely would drive population to our state is the reduction and the elimination of our personal income tax in West Virginia. Absolutely, that is the key,” Justice said at a news conference.
The governor said the 10% reduction is the maximum cut allowed while remaining in compliance with funding stipulations in the American Rescue Plan Act. He said it remains to be determined how the proposal would impact various income levels.
“We’ll try to make it as fair as we can possibly make it,” he said. “We want real job creators to bring more and more opportunities to the folks of West Virginia.”
Justice said the proposal would be retroactive to Jan. 1 and would put $254 million back into residents’ pockets when they file their 2022 taxes. The reduction would be automatic on October payroll withholdings.
“This is the absolute fastest way that we can get money and real relief all across the board to every single taxpayer in the state of West Virginia," Justice said. "This is the way to do it, and to do it right now. We’ve got the money.”
Justice tried to reduce personal income taxes by 60% last year as a way to spur population growth in a state that saw the highest percentage of residents leave over the past decade. The proposal was unanimously rejected in the House.
A 10% tax cut was passed by the House of Delegates in March but never made it to a vote in the state Senate.
Total tax collections for the year in the state were $5.89 billion.
For the year, personal income tax collections of $2.5 billion were $461.5 million above estimates and 16.6% higher than a year earlier. Consumer sales tax collections of $1.66 billion were $181.7 million above estimates and 7.7% higher than fiscal 2021.
Corporate net income tax collections of $366.3 million were $206 million above estimates and 38.5% higher than a year earlier. Severance tax collections of $768.8 million were $438.9 million above estimates and 180% higher than a year ago.
Revenue Secretary Dave Hardy said 48% of severance taxes, which apply to the extraction of natural resources, were from natural gas, 35% was from coal and 17% were from other sources, including oil. Hardy said it’s a further indication that the state’s energy sector economy is diversifying.