By ANDREA LANNOM
CHARLESTON, W.Va. — After making additional changes over the weekend, a Senate committee advanced a bill Monday that would decrease personal income tax and create a consumption tax.
The Senate Select Committee on Tax Reform made a few changes SB 335 in their Saturday meeting, then made additional changes before Monday’s meeting.
Under the new version, personal income tax will decrease to 2.5 percent. The bill starts to phase out personal income tax in 2023, expiring completely in 2032, if certain ratios are met regarding the percentage in the Rainy Day Fund in comparison to the General Revenue Fund.
If those qualifications are met, then the corporate net income tax would phase out.
Beginning Oct. 1, the current sales tax would go away and would be replaced by a consumption tax at a rate of 8 percent. The food tax would be implemented after Jan. 1, 2018.
The bill also would turn the severance tax on coal into one uniform 2.5 percent tax. Natural gas would decrease from 5 percent to 3 percent.
The committee also passed an amendment that would increase the soft drink tax from 1 cent to 5 cents, with 1 cent still going to West Virginia University School of Medicine; increase wholesale markup prices for liquor other than wine from 28 percent to 36 percent; increase the beer barrel tax from $5.50 to $11 per barrel; and would exempt Social Security from the income tax.
Sen. Robert Plymale, D-Wayne, asked what the fiscal effect of this amendment would be. Sen. Ed Gaunch, R-Kanawha, who proposed the amendment, said the fiscal effect of exempting Social Security would be about $90 million.
Sen. Robert Karnes, R-Upshur, said the soft drink tax would generate roughly $60 million. The alcohol tax combined with the barrel tax would be about $13 million.
“I would remind members that the charge of the committee is revenue neutral changes to the tax codes. This stays roughly within that guideline,” Karnes said.
The new version of the bill also includes taxes on delivered newspapers, utility services and some professional services.
Some exemptions to sales tax include college tuition, most professional services, advertising, prescription medicine, most charities and licensed daycare services.
The bill also offers a fixed income tax credit for seniors and low income residents.
For the next fiscal year, everything above the $150 million mark with revenue will go into the Rainy Day Fund and for subsequent years, there are triggers allowing for additional money to go into the Rainy Day Fund.
Sen. Ryan Ferns, R-Ohio, amended the bill Saturday to exempt military retired pay from personal income tax.
The bill will be reported to the Senate Committee on Finance before going before the full Senate.
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