By LACIE PIERSON
The Herald-Dispatch
CHARLESTON, W.Va. — Wednesday started with two major tax reform measures in the West Virginia Legislature, but only one survived the cutoff date for bills to be passed in their chamber of origin.
The West Virginia Senate approved its 2017 Tax Reform Act before lunchtime Wednesday, but the House of Delegates quietly killed a lighter version of the Senate bill on Wednesday evening.
Wednesday was what’s known as crossover day, the last day a bill can be approved in the chamber it originated in and still have time to be considered by legislators in the other chamber.
Now, the most substantial tax reform measure eligible for consideration in the legislature is in the hands of members of the House of Delegates.
The House elected to delay voting on its tax reform proposal, House Bill 2933, until Thursday, pushing it past the deadline for consideration and effectively killing the measure.
About six-and-a-half hours earlier, the Senate approved Senate Bill 409, the 2017 Tax Reform Act.
The bill was approved in a 22-12 party-line vote.
Of local senators, Sens. Bob Plymale, D-Wayne, Mike Woelfel, D-Cabell, Richard Ojeda, D-Logan, and Ron Stollings, D-Boone, voted against the measure. Sens. Mark Maynard, R-Wayne, and Chandler Swope, R-Mercer, voted in favor of it.
Those who voted in favor of the bill in the Senate said it was a needed revenue measure that would help West Virginia achieve prosperity, largely through a nearly two-decade-long phaseout of the state’s income tax. Those who were against the bill said it wasn’t properly vetted and the measure would raise state revenue on the backs of low- and middle-class West Virginians.
Senate Bill 409 increases the sales tax from 6 percent to 7 percent.
The bill provides for the increased sales tax rate to be charged for certain services that currently are exempt: newspaper delivery, funeral and embalming services, hair and skin care services, non-medical personal care, telecommunications services, solid waste disposal, electronic data processing, educational summer camp tuition, health and fitness club memberships, transportation of passengers through interstate commerce, sales of primary opinion research services, music instruction, artistic performance admissions and travel agency fees.
The bill also restores a sales tax of 3.5 percent on groceries. Currently there is no sales tax on food.
Also in SB 409 is a measure to change the state’s income tax structure with a means of potentially phasing it out altogether.
The proposed income tax structure would tax $20,000 or less in income at 1.65 percent, and people making between $20,000 and $35,000 would be taxed at 3.3 percent. Anyone making $35,000 or more would have an income tax rate of 5 percent.
The income tax phaseout plan provides that for every $50 million in revenue past $1.8 billion brought in from the sales tax, the income tax will drop .1 percent at each level, meaning the income tax on the lowest earners would be the first to be phased out.
So, in real numbers, the state would have to generate $1.85 billion in revenue from the sales tax in order for the income tax decrease to kick in and maintain it in consecutive fiscal years for the income tax to be phased out altogether.
There are seven states in the United States that do not have income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
The bill also provides a tax credit up to $200 for low-income senior citizens.
Even though the majority party supported the bill, multiple senators said they did so with apprehension about the measure and urgency at this point in the legislative session.
Finance Committee Chairman Mike Hall, R-Putnam, said he was in an awkward spot because he did not support much of the bill’s provisions, but he wanted to keep any revenue measures alive beyond crossover day.
“After today, the only bills we can pass as the originating body would be the budget bill, bills relating to salaries and special appropriations,” Hall said.
“After today, if we don’t take action and move a bill to the House that has the potential for revenue in dealing with our budget and should it die here we would be left, Mr. President, without any potential at all this session for a revenue measure.”
Woelfel and Plymale each addressed the Senate against the bill, with Woelfel saying the grocery tax and restructured income tax was oppressive to West Virginia’s lowest wage earners and disproportionately benefited the state’s highest wage earners.
“It’s good to be rich – that’s what this is,” Woelfel said. “This room is full of smart people and well intentioned people. However, this is a regressive tax structure. It’s the old trickle-down economic theory that’s been rejected wholly throughout the country for decades.”
Plymale voted against the bill for similar reasons that Republican senators said they were apprehensive about it: The measure was quickly put together and passed through the Senate and its committees after a previous, heftier tax reform, Senate Bill 335, lost traction.
The tax reform measure that died in the House, HB 2933, would have lowered the sales tax rate to 5 percent and expanded what services and transactions were taxable under state code.
The House bill included all of the taxable services and events in SB 409, and it additionally would have taxed professional services including legal services, engineering services and contractor services, among others.
It also would have brought back the sales tax on groceries, but at 3 percent, a half percent lower than the Senate’s proposal.
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