By ANDREA LANNOM
The Register-Herald
CHARLESTON, W.Va. — A bill that would decrease the personal income tax and increase consumption tax advanced out of a Senate subcommittee Monday.
Senate Bill 335 would lower personal income tax to 2.5 percent and would start to phase it out in 2023, expiring completely in 2032, if certain ratios are met regarding the Rainy Day Fund compared to the General Revenue Fund. The bill also would create an 8 percent consumption tax, including bringing back the tax on groceries at that rate.
Members of the Senate subcommittee on finance took up the bill and listened to an overview presented by Mike Caryl, former state Tax Commissioner and retained consultant.
However, those who supported the bill said it is a flexible piece of legislation that can be changed through the legislative process. In their view, they believe the bill will lead to economic growth in the state.
The bill now heads to the full Senate Committee on Finance.
In Caryl’s overview of the legislation, compared some of the changes in the 96-page bill from the introduced version compared to now.
Current 6 percent sales and use taxes would be repealed and replaced with an 8 percent revised consumption tax. One of the big differences, he said is that groceries are taxable under this bill.
Starting Jan. 1, personal income tax would decrease to a flat rate of 2.5 percent for all taxpayers. If personal income tax is repealed, corporate net income tax would start to phase out.
The committee substitute also exempts Social Security and military retiree pay from personal income tax.
Senator Corey Palumbo, D-Kanawha, who does not support the legislation, said he is concerned with the effects on lower to middle income people and the 8 percent sales tax, which he said would be very difficult to retailers in the state, particularly in border counties.
“As we move forward, these are things we have to be mindful of. I have heard no evidence to dissuade me of these concerns to shift the burden to middle income people. We need that info.
Sen. Robert Plymale, D-Wayne, said although he believes the new version is better than the original, he still has concerns.
“In particular, the tax going from 6 to 8 percent is a concern where I live,” Plymale said. “I’ve heard this from businesses over and over. The sales tax increase among other things are my major concerns.”
Sen. Greg Boso, R-Nicholas, said he believes the bill could draw business and manufacturing into the state.
“Is it perfect? Most likely not. With the legislative process, if we find a year down the road it’s not perfect, we can tweak it a little bit. What I look at more than anything else is the impact other states have had on their local economy with changing the tax structures in those states.”
Earlier Monday morning, the Senate Committee on Tax Reform took up Senate Joint Resolution 8, which would amend the state Constitution. The resolution would step down personal property tax in West Virginia, except for personal property for public service utilities.
Members of the committee did not vote on the resolution Monday but heard an overview of what it would do.
Under this resolution, the personal property tax on motor vehicles would be eliminated and personal property tax on all other personal property would be assessed at the value on the date the amendment is ratified by voters.
The resolution said personal property tax would be reduced 10 percent annually for 10 years until it is eliminated. After that, it would be prohibited except as it relates to public service companies.
Counsel for the committee explained under this amendment, there would be three rates of tax classes. Under first class, which would include agriculture and commercial forestry, the rate would be 0.5 percent. The second class, which includes residential purposes, would be 1.5 percent. The third class would be for commercial land at a rate of 1.75 percent.
Under the resolution a three-fifths majority vote in each house of the Legislature would be needed to reinstate any repealed tax.
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