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Justice puts off income tax overhaul

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — Gov. Jim Justice said Monday he would ultimately like to phase out the state income tax when the state’s financial picture stabilizes, but said it would be “phenomenally risky” to make major overhauls of state tax law in the midst of the current budget crisis.

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

Earlier Monday, the Senate Select Committee on Tax Reform reviewed but did not take action on a bill that would repeal the state income tax, replacing it with a broad-based 8 percent sales tax on most goods and services, including groceries (SB335).

The bill was explained by Michael Caryl, tax commissioner under then-Gov. Arch Moore in the 1980s, who has been retained by the committee as a special consultant.

It would repeal the state income tax, the state’s largest source of general revenue at nearly $1.9 billion, replacing it with an 8 percent consumption tax on virtually all goods, services, sales and leases.

The bill also would phase out the corporate net tax, which currently provides about $170 million in revenue a year, and would roll back severance tax rates on coal and natural gas production.

Caryl said the legislation provides 31 categories of consumption tax exemptions, primarily for “business inputs,” such as exempting retailers from paying taxes on wholesale purchases.

“A good number of these exemptions are to avoid the [tax] pyramiding that it’s said to cause,” Caryl said.

He said all of the 31 categories are exempted from sales taxes under current law.

Also, the current 5 percent tax on motor vehicle purchases would increase to 8 percent for the first $10,000 of cost, and 6 percent above that.

There is also a provision to collect a “contingent income tax” for up to five years after the new law goes into effect, if necessary to balance the budget. The contingent tax would kick in if the state’s Rainy Day reserve funds fall below an amount equal to 15 percent of the state’s general revenue budget, or if consumption tax collections fall below 97 percent of projections.

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