GOP leaders split on Tomblin's tax proposals

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GOP leaders split on Tomblin's tax proposals
By David Gutman and Eric Eyre, The Charleston Gazette-Mail

Republican legislative leaders were split over Gov. Earl Ray Tomblin’s proposal to partially fill the state’s budget shortfall with tax increases, with Senate President Bill Cole open to the idea and House Speaker Tim Armstead deeply skeptical.

Armstead said House members favor cutting state government spending — not raising taxes. In addition to significant spending cuts already in effect on this year’s budget, Tomblin proposed raising taxes on cigarettes and phone lines during his State of the State speech Wednesday night.

“These proposals from the governor are basically asking the people of West Virginia to step in and take more of their hard-earned money to solve these [budget] issues,” said Armstead, R-Kanawha. “I think West Virginians want us to tighten our belts first and cut spending.”

Cole, R-Mercer, a candidate for governor, said he had only seen Tomblin’s proposals minutes before they were unveiled in the State of the State speech, but that he was committed to working with the governor to close the budget gap, projected at more than $350 million. If raising taxes are part of Tomblin’s solution to the funding crunch, well, Cole will consider that too.

“I’m not too open to just general tax increases, but if it can be considered as closing a tax loophole, an opportunity where somebody, for some reason or another, has sort of gotten away from paying their fair share, if it’s a fairness issue, I don’t have a problem looking at those things,” Cole said.

The governor’s proposal to start taxing landline and cellphone bills — at 6 percent —might fall under that heading, Cole said.

Tomblin said that 41 other states tax such telecommunications, and that doing so in West Virginia would bring in $60 million a year.

“I’ve always said, where we’re an outlier, we should consider not wanting to be an outlier,” Cole said. “It’s hard for me to say anything’s off the table.”

Armstead said a phone tax won’t be on the House’s table.

“I’m not excited about a cellphone tax,” he said. “It’s not a very responsible approach to come up here and say we want tax increases to fill budget holes.”

Tomblin also proposed a $71.5 million tobacco tax hike. The tax would add 45 cents to every cigarette pack purchase, raising the total tax to $1 a pack. Tomblin said the increase would “strike a balance,” protecting retailers in West Virginia counties that border other states, while discouraging people from smoking.

The governor wants to pump $43 million of the $71.5 million in new revenue into the public employee health insurance plan to help alleviate significant cuts in state workers’ health benefits.

House Majority Leader Daryl Cowles said a tobacco tax would be a difficult sell to state lawmakers from border counties.

“Virginia’s awful close to home,” said Cowles, R-Morgan. “There’s not much of an appetite to raise taxes. We should streamline government.”

Virginia has a cigarette tax of 30 cents per pack. Maryland, which also borders Morgan County, has a tax rate of $2 per pack.

Senate Minority Leader Jeff Kessler, also a candidate for governor, has been calling for a $1 per pack rise in the tobacco tax for months. He applauded Tomblin’s move.

“His willingness, for the first time since he’s been in office, to talk about revenue enhancements,” said Kessler, D-Marshall. “I think they are important, and also a recognition that you can’t solve this budget crisis with merely cuts alone.”

Representatives from both the tobacco and telecommunications industries said they would be open to the tax hikes.

Kit Francis, a lobbyist for Reynolds American tobacco, said he was a bit disappointed, but the amount of the proposed increase was “not unreasonable.

“They have to determine,” Francis said, “whether the state’s poorest sector, the adults who choose to smoke, should be burdened with a tax increase to meet the budget.”

Kevin Wallick, a senior vice president for Frontier Communications in West Virginia, said they recognize the urgency of the budget deficit.

“If the governor supports it and the Legislature passes it, my job is to collect that tax,” Wallick said. “So, from that perspective, we would support it.”

State workers are staring at draconian rises in co-pays and deductibles on their health insurance unless the Legislature addresses a funding gap of about $120 million in the program.

Tomblin said that the tobacco tax hike, along with savings he said would come from a new prescription drug package, would alleviate 90 percent of the projected benefits cuts.

Dale Lee, president of the West Virginia Education Association, was dubious.

“You can’t fix a $120 million hole with $43 million,” Lee said. “It’s a start, it’s a first step, but that’s all it is, is a first step.”

Lee lamented that state employees will see no pay raise in next year’s budget, which will do nothing to help ease the teacher shortage — there are more than 600 openings — the state is facing.

Cole said that he wished Tomblin had proposed means-testing the health insurance plan for state workers, so that state workers with, for instance, wealthy spouses got less generous benefits.

House Republicans also criticized Tomblin’s opposition to charter schools. In his speech Wednesday night, Tomblin said, “... traditional charter schools are not the best option for our students.”

“Public charter schools with strong accountability can unleash that innovation that’s sorely lacking across our state,” said Delegate Paul Espinosa, R-Jefferson, the new chairman of the House Education Committee.

Cole’s chief lieutenant, Senate Majority Leader Mitch Carmichael, said the tax increases would face long odds in the Republican-controlled Legislature, but expressed, perhaps, a glimmer of available common ground.

“They’re really long odds,” said Carmichael, R-Jackson,. “We’re for some of these taxes, but in others, just to lay an enormous tax increase on the people of West Virginia without running government more efficiently is the wrong approach.”

Delegate Don Perdue said it’s easy to talk about making government more efficient through spending cuts, but often difficult to do.

“I’m not sure how we cut spending with the challenges we have,” said Perdue, D-Wayne. “We’ve got to repurpose the state, and the Republicans’ mantra continues to be we can do that without raising taxes.”