Bills give insight into Justice’s tax plans

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — Parts of Gov. Jim Justice’s legislative agenda, introduced Tuesday, provides some insights on the new governor’s tax plans, as well as his proposal to offer an optional annual pass to give drivers toll-free use of the West Virginia Turnpike and any future toll roads in the state.

Justice bills introduced Tuesday deal with proposed tax increases to help close a $500 million shortfall in the 2017-18 state budget (SB 484) and to authorize the state Parkways Authority to issue new road bonds, to be financed by continuing tolls on the Turnpike and any future state toll roads (SB 482).

Among the highlights from the bills:

The proposed gross receipts tax on businesses and an increase in the consumer sales tax are envisioned as temporary revenue sources. Both would expire on June 30, 2020 — if the balances in the state’s Rainy Day Funds equal 15 percent of the general revenue budget.

The Rainy Day Funds have been above the 15 percent threshold for the past six years, but Justice’s plan to take $123 million from the funds to close a deficit in the 2016-17 budget would take the balance down to about 13 percent.

A proposal to collect a 6.25 percent sales tax on professional services continues an exemption for all medical-services professionals, “with the exception of veterinarians.”

Repealing the sales tax exemption for professional services is projected to raise $78.9 million a year. However, a 2016 study by the Department of Revenue showed that medical services make up the vast majority of professional services provided in West Virginia, with the exemption amounting to $750 million in lost sales tax revenue.

The bill introduced Tuesday does not include revisions to the tax plan that Justice unveiled Monday afternoon, including his decision not to impose a sales tax on advertising, saying he had concluded that the $5.4 million in potential revenue is “just not worth” the additional cost to businesses, as well as the expense of administering the tax.

The governor’s bill would appoint a study commission to determine the feasibility of eliminating the state’s personal income tax.

The commission, which would be made up of the governor, the revenue secretary, the Budget Office director, tax commissioner and two members of the academic community with “extensive expertise” in the tax system, would be mandated to issue a report by Dec. 1, 2018, on the feasibility and fiscal implications of eliminating the tax, which is the largest source of general revenue, at nearly $1.9 billion a year.

On Monday, Justice said a Senate proposal to proceed immediately with the income tax repeal would be “phenomenally risky,” with the current budget crisis.

“Ultimately, down the road, I’d like to see us eradicate the state income tax,” Justice said Monday. “To jump into that is just so phenomenally risky today.”

The bill extending the Parkways Authority’s power to sell bonds for highways construction projects sheds some light on Justice’s proposal to give drivers the option to pay an annual vehicle fee that would allow them to waive tolls on the Turnpike or any new state toll roads for the year.

It specifies that the “single fee” program would apply only to noncommercial passenger vehicles, and that the Parkways Authority will set the flat-rate fee.

On Monday, Justice said the optional fee would be about $8 a year and, to comply with federal interstate-commerce laws, would be available to nonresidents.

Justice indicated that drivers who pay the fee would receive special E-ZPass transponders for free travel on West Virginia toll roads.

The bill states, “A registered motor vehicle for which such single program fee has been paid shall be entitled to transverse all toll roads within the state without stopping to pay individual tolls during the effective period of said vehicle registration.”

Justice said the proposal would require doubling Turnpike tolls, from $2 to $4 for passenger vehicles, to account for out-of-state drivers who will participate in the single-fee program.

The Parkways bill was assigned to the Senate Transportation Committee, while the tax bill was sent to Senate Finance.

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