West Virginia House passes Social Security tax phaseout

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• The Republican-led West Virginia House of Delegates voted Thursday in favor of a bill that would implement a gradual phaseout of the state's tax on Social Security benefits.
• If signed into law, the bill would retroactively cut this year's tax by 35%, and next year's by 65%, before being eliminated completely come 2026.
• The phaseout was a key agenda item Republican Gov. Jim Justice stumped for last month in his final State of the State address.

West Virginia's Republican-led House of Delegates approved a bill Thursday that would cut and gradually phase out the state income tax on Social Security benefits.

Eliminating the tax is a key priority for GOP Gov. Jim Justice, who announced it as part of his annual budget proposal during his final State of the State address last month.

In 2019, the Legislature passed a bill cutting the income tax on Social Security benefits for the state's lowest earners — those making less than $100,000 filing jointly and $50,000 for a single person — over three years.

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The proposal passed Thursday, which now heads to the Senate, would eliminate the tax for everyone else, also over a three-year period. The tax would be cut by 35% this year — retroactive to Jan. 1 — and 65% in 2025. The tax would be phased out completely by 2026.

It's unclear what Justice will make of the proposal. His version would have eliminated the personal income tax on Social Security this year, retroactive to Jan. 1.

Seen here is West Virginia's Capitol dome in Charleston, West Virginia. (AP Photo/Jeff Gentner, File)

Speaking in support of the measure, Republican Del. Larry Kump of Berkeley County said states surrounding West Virginia don't tax Social Security benefits.

"This issue regarding taxation on Social Security or any pension or retirement program really grinds my gears, gives me legislative heartburn. We’ve been fooling around with this taxation issue on Social Security for many years now, and I’m grateful that we’re going to be doing some more on it."

Kump said he's also concerned about retired public employees and how cost of living increases are impacting their pensions. "But that’s another issue," he said. "Let’s go ahead and pass this bill. It’s certainly better than a poke in the eye with a sharp stick. And let’s keep the light on for these people."

The tax cut would cost around $37 million in both 2025 and 2026 and would impact more than 50,000 households.

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Last year, Justice signed a 21.25% income tax reduction into state law, returning more than $750 million to state residents amid a record budget surplus of $1.1 billion. But the West Virginia Center on Budget and Policy urged caution Thursday, with Executive Director Kelly Allen saying in a statement that "continued efforts to erode and eliminate the personal income tax are undermining our ability to meet the needs of seniors, children and families across our state."