Appeals Court Victory Improves West Virginia Income Tax Cut Options

January 23, 2023

Mountaineer News

West Virginia State News

CHARLESTON, WV - West Virginia Attorney General Patrick Morrisey thinks a recent court ruling will allow the Legislature more flexibility as it debates lowering West Virginia’s income tax rates.

Morrisey led a 13-state coalition that sued the federal government over a tax mandate in the American Rescue Plan Act that prevented states from using ARPA funds to “to either directly or indirectly offset a reduction in [their] net tax revenue” that results from a change in law that “reduces any tax.”

West Virginia’s House recently passed a bill that would cut the state’s personal income tax by 50% progressively over a three-year period. That would be done by progressively reducing the rates of each tax bracket over the three-year time period, beginning retroactive to Jan. 1 of this year.

House Bill 2526 has been introduced in the Senate and is assigned to the finance committee.

The court ruling would ensure that the income tax cut could happen without risk of the tax cut being considered a cut made possible due to ARPA funding. A fiscal note on the income tax bill estimates it will mean the state would collect $1 billion less for financial 2024, $1.2 billion less in financial 2025 and $1.5 billion less in financial 2026 with that number estimated to continue to increase in future years along with estimated tax base growth.

“This decision will provide significant additional flexibility to the State Legislature as it debates how best to cut taxes,” Morrisey said. “There should be no excuses about whether to cut taxes anymore — my office is providing the legal tools to the legislature and governor to be very aggressive in providing tax relief to our people.”

The ruling came in the U.S. Court of Appeals for the 11th Circuit in Atlanta with West Virginia as a co-sponsor plaintiff along with Alabama and Arkansas. Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah were also named on the suit.

“Our lawsuit was designed to protect West Virginia from federal overreach,” Morrisey said.

“We have fought back against that overreach with the November 2021 win in district court, but the Biden administration kept on insisting their interpretation of the law is correct.