West Virginia’s long road to tax relief was beginning to feel older than the trees, but after many years of efforts, the state’s lawmakers are finally taking home a win.

Under an agreement reached over the weekend and pending final action in the House, lawmakers and Gov. Jim Justice (R) reached a deal that will reduce individual income taxes, rebate the car tax, and provide property tax relief for business machinery, equipment, and inventory. Each side gave up something, but the result is a more competitive tax code for the Mountain State.

House Bill 2526, as amended, implements an across-the-board income tax rate cut of about 21.2 percent, reducing the top rate from 6.5 to 5.12 percent, while the lowest rate declines from 3.0 to 2.36 percent. Further rate reductions will proceed automatically subject to revenue availability, based on a set of triggers added to the legislation.

Meanwhile, although legislators lack the constitutional authority to repeal local taxes on tangible personal property, they are reducing these taxes’ bite by offering a fully refundable income tax credit for car tax liability, and a 50 percent credit against businesses’ property taxes on machinery, equipment, and inventory. This approach isn’t perfect, but it does reduce the tax burden on in-state capital investment. The deal also includes a full credit against property tax liability for disabled veterans.

The first-year changes would improve West Virginia’s ranking on the State Business Tax Climate Index by an estimated three places (absent policy changes by other states), with potential for further improvement in future years. More importantly, it brings the state’s income tax rates closer to the national median and reduces the burden of the state’s taxes on capital investment, making West Virginia a more attractive state in which to live and work.

West Virginia policymakers have tried to move the needle on tax reform for years. Most of these efforts—especially where tangible personal property (TPP) taxes are concerned—have stalled.

In 1999, the Commission on Fair Taxation proposed eliminating TPP taxes and the business franchise tax, identifying both as barriers to the state’s economic growth. In 2006, the Tax Modernization Project made an identical recommendation. In the mid-to-late 2010s, the House held a number of hearings exploring TPP relief. In 2018, Gov. Jim Justice backed a constitutional amendment on the issue, introduced by the leaders of each chamber. Last year, legislative leaders pushed a similar constitutional amendment, which failed at the polls as Gov. Justice barnstormed in opposition.

Meanwhile, Gov. Justice’s prior efforts to repeal the income tax—at least for non-business owners—met with strong resistance, and when the Governor and the House proposed a 50 percent reduction in rates this year, the Senate balked at the size of the cuts, concerned about their sustainability, while the House objected to the Senate’s focus on tangible property tax relief after the failure of a constitutional amendment last year.

This year, the House passed its tax cut plan on a bipartisan 95-2 vote, then the Senate passed a competing plan on a unanimous 33-0 vote. Each chamber had near-unanimity internally, but they were at loggerheads with each other until a compromise was brokered this weekend.

Yes, it was a long road, with many twists and turns. But policymakers have finally arrived at a worthy destination.

West Virginia’s current top income tax rate is tied for the 14th-highest in the country. When the state last cut its top income tax rate to 6.5 percent, the median top rate was 8 percent. Today it is 5 percent—and declining. Bringing the top rate to 5.12 percent, and putting it on the path to future reductions, puts West Virginia back in line with its peers, with the opportunity for greater rate competitiveness in the future.

West Virginia becomes the 22nd state to cut individual income tax rates since 2021, the 29th state to cut the rate of some tax (12 states have cut corporate income taxes and two cut sales tax rates, among other changes), and the 45th state to offer some meaningful amount of tax relief since then.

In a day and age when businesses and individuals alike are increasingly mobile, West Virginians can be relieved that their state is getting off the sideline and into the action.