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West Virginia gov proposes cutting Social Security tax

January 10, 2019
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Gov. Jim Justice, R. W.Va., delivers his annual State of the State speech on Wednesday, Jan. 9, 2019, in Charleston, W.Va. (AP Photo/Tyler Evert)
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Gov. Jim Justice, R. W.Va., delivers his annual State of the State speech on Wednesday, Jan. 9, 2019, in Charleston, W.Va. (AP Photo/Tyler Evert)

CHARLESTON, W.Va. (AP) — West Virginia Gov. Jim Justice is proposing the elimination of a state tax on Social Security benefits but offering significant funding increases for substance abuse, social services and tourism in the next fiscal year.

Justice gave his third State of the State address Wednesday night as revenue figures continue to improve two years after the state was mired in a budget crisis. Figures released Tuesday showed revenue collections were $186 million ahead of estimates at current fiscal year’s midpoint. The last fiscal year ended with a $36 million surplus.

“The first time I walked in the door, things were pretty doggone tough. Our state was bankrupt,” the Republican governor told a House of Delegates chamber packed with lawmakers, other officials and guests. “There’s been lots and lots and lots of hard work. I do feel like I came up with a doggone good bunch of ideas. This is not a king or a dictatorship. This is a body of people that are all in this together.”

Justice’s proposed budget of about $4.7 billion from general revenues for the fiscal year starting in July is based on a 2 percent projected revenue growth. Proposed expenditures represent a 1.73 percent increase. Justice proposed no new taxes.

If passed by the Republican-controlled Legislature, eliminating the Social Security tax would mean a $50 million reduction in revenue collected.

West Virginia is among 13 states that currently tax Social Security benefits. Surrounding states aren’t among them. Deputy revenue secretary Mark Muchow said most senior citizens don’t pay taxes on Social Security income because they don’t make enough money.

Justice also wants to phase out business inventory taxes to eliminate what has been considered a roadblock to the state economy and job growth. That tax bill failed to pass last year. Revenue from the tax would have to be replaced — most of that money goes to counties to support their school systems.

Senate President Mitch Carmichael said eliminating those two taxes are “valid objectives, but we’ll have to validate the (budget) numbers.”

In a statement, House Speaker Roger Hanshaw called Justice’s budget “a bold, ambitious agenda. He has many ideas I believe the House can embrace and our members will be excited to move forward on.”

Senate Democratic leader Roman Prezioso said Justice shouldn’t take credit for the improvement in the state’s economy because “it’s just the way the economy is moving now.”

He said the governor proposed “a lot of ideas that amount to a lot of money. Is there going to be enough money in the budget to pay for it?”

Prezioso said the funding might not be available after the second-half of this fiscal year due mostly to recent natural gas industry layoffs that will reduce collections of severance taxes.

House Democratic leader Tim Miley said some of Justice’s proposals will only add to government bureaucracy.

“I didn’t hear anything in his speech that will make West Virginia a compelling place for people to want to stay here or come here and move for the first time,” Miley said. “There’s a lot of problems he’s trying to fix in our state, but none of which are going to be appealing to people outside of our state.”

The budget includes an additional $25 million for substance abuse programs, $20 million each for social services and state building maintenance and $14 million more for tourism.

Justice is proposing another 5 percent pay increase for teachers and other state employees that he had promised in October. Teachers last year also received a 5 percent pay increase following a nine-day strike.

Justice had previously proposed infusing $100 million into a troubled insurance plan covering teachers and other state employees. On Wednesday he increased that to $150 million, which would be handled through a supplemental budget appropriation.

He also wants legislation that would raise teacher salaries in areas such as math and science even more “in order to remain competitive.” He also suggests using $5 million to expand a dropout prevention program statewide. The Communities in Schools program is currently in use in three counties, including his home base of Greenbrier County.

“I really do believe education is the hotspot that can really change our image,” Justice said.

The governor also called for the state Department of Environmental Protection to look into the development of more lakes for use in either hydroelectric power or flood control.

Justice suggested using unspecified funding to fix more of the state’s secondary roads and update the state police forensic lab. The governor also wants to eliminate more than 10,000 vacant state government jobs that have gone unfilled over the past year.

Justice also is seeking the establishment of an intermediate court system, a proposal that failed to pass the Legislature last year.

Some lawmakers have floated the idea to address legalizing the recreational use of marijuana, but Justice said he is adamantly against it.

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