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House advances changed tax reform bill


The Register-Herald

CHARLESTON, W.Va.  — A House committee advanced to the floor Monday a bill dealing with broadening and lowering the sales tax rate.

Questions surfaced in an afternoon floor session about whether a bill was passed to the full House dealing with broadening and lowering the sales tax rate; members voted to send it back to the finance committee but later voted to send it to the House floor.

Earlier on Monday, the House Finance Committee took up a strike and insert amendment to Senate Bill 484. Members voted on the amendment, passing it in a 13-11 vote, but there were still some questions about the language — whether it was passed to the full House.

Monday afternoon, Delegate Isaac Sponaugle, D-Pendleton, asked for clarification. It was determined the bill was indeed passed but after the more than three-hour session dealing with debate on the medical marijuana bill, Nelson asked for unanimous consent to send the bill back to committee just in case there were any questions.

Under the amended bill, the sales tax would be reduced to 5.5 percent by July 2018. It would then lower to 5.25 percent in 2019. It could ultimately lower to 4.75 percent in the next five years if certain triggers are met.

“This is lower than any state surrounding us. It will give taxpayers a break and increase activity of consumer consumption,” Delegate Eric Nelson, R-Kanawha, and chair of the Finance Committee, said after the committee meeting.

This version of the bill marks a change from the previous version. One of the biggest changes is that the new version took out the portion that would have lowered the personal income tax. The original bill had it divided into three brackets. The food tax, which was 7 percent under the last version, also was taken out.

Much of Monday’s discussion centered on eliminated exemptions under personal and professional services.

A new sales tax on telecommunications and ancillary services would begin July 1. The exemption on contracting services amounting to more than $40,000 also would be subject to the sales tax.

The bill also would eliminate exemptions for electronic data processing services, memberships to health and fitness centers, activity of transport.

The bill also would transfer a portion of sales tax from the state road fund to the General Revenue Fund.

The tax on telecommunications, as committee counsel explained, would be for throw-away phones purchased from wireless phone providers along with landlines.

Delegate Mick Bates, D-Raleigh, asked if a fiscal note was prepared for the bill, concerned that the committee would have to pass the bill to know what was in it. Other delegates said a fiscal note isn’t generally prepared until the bill is sent to the floor.

However, Mark Muchow, deputy revenue secretary with the Department of Revenue, prepared an estimate shortly before the meeting.

Muchow said the elimination of the general revenue transfer from the state road fund would generate $11.7 million each year. The estimate for the next fiscal year would be in the neighborhood of $150 million.

The elimination of the exemption of telecommunications at a rate of 6 percent would generate about $60 million, he said, or roughly closer to $55 million for the next fiscal year because of a one-month lag in collections.

The elimination of the exemption for personal services, such as hair and nail salons, Muchow said, would generate about $4.7 million.

He said other exemptions that come off in October of this year could be combined for about $54 million and range from $30 million to $35 million for the next fiscal year.

Muchow said health and fitness clubs would be about $2.5 million for the full year.

Bates asked if that meant that the bill would amount to about a $150 million tax increase the coming fiscal year and whether it would go upside down the subsequent two years.

Muchow said it wouldn’t be a tax increase for the next fiscal year. He said it would trail off in 2019 because of the reduction in the sales tax rate and would go slightly negative in 2020 and even more negative after 2021.

Delegate Linda Longstreth, D-Marion, asked if under the amendment, the tax reduction would cause lost revenue and result in a net loss for the state budget.

Muchow said it is relative to the current baseline but when it gets into 2020, it does go into the negative side. However, he said that doesn’t account for increased economic activity.

Delegate Larry Rowe, D-Kanawha, also moved to amend the bill to exempt the transport of coal from the sales tax. This amendment was approved. He made another amendment to get rid of the sales tax on personal care such as hairstyling, shoe shining and other services, saying it would be a burden on small businesses. However, this amendment was rejected.

Before the amendment went up to vote, Sponaugle spoke out against it.

“Broadening the base is just slick politicians’ words for taxing everything on God’s green Earth,” he said. “You’re taxing barbers, shoe shiners — if you have your shoes on; if you take your shoes off, it’s not taxed — TV, radio, gyms, contractors, taking care of the elderly. You’re taxing everybody. Absolutely everybody. But then you say that it’s a tax cut because on the far back end, there are lower rates.”

Delegate Eric Householder, R-Berkeley, said the bill would improve the state’s economy.

“The current tax structure is pushing people and jobs away from the state,” Householder said. “We’ve seen a net migration leaving. Changing the structural deficiencies and reforming the tax structure is a chance to broaden the base and lower the rate. After implementing, this will offset any revenue and cut taxes for struggling West Virginians. This will put us on a pathway to creating jobs and right-sizing government.”

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