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Revenue bill in high-stakes negotiation point

By LACIE PIERSON

The Herald-Dispatch

CHARLESTON, W.Va. — Members of the West Virginia Legislature picked up Wednesday where they left off on May 24 and sent a tax revenue measure to a conference committee with the goal of reaching a compromise before June 30.

House Bill 107, or the West Virginia Tax Reform Act of 2017, was referred to the committee in the first formal legislative action taken by lawmakers in regard to the revenue measure they estimate will close a budget gap for fiscal year 2018, which begins July 1.

The committee members met for the first time Wednesday afternoon, outlining areas where they agreed, but they were most prepared to address areas where their biggest disagreements lie: the rate of the state’s sales tax and the trigger points that would lead to reductions in the income tax rate after fiscal year 2018.

Wednesday’s meeting was the first public conversation about the budget among lawmakers since they voted to adjourn from the special session on May 24.

On May 24, it seemed the conference committees would be called, until the early evening when, at the request of Gov. Jim Justice, lawmakers adjourned and spent the next week and a half in private, informal negotiations about the revenue measure.

Legislative leaders already have reached an agreement with Justice regarding the budget for 2018, with the major term being that the state will operate at a level of $4.35 billion.

Current revenue projections show the state is set to take in about $4.225 billion with current and expected means of revenue intake, including an increase to the wholesale tax rate on gasoline and to Department of Motor Vehicles fees, per Justice’s roads improvement plan. A version of the bill to fund the roads plan passed the Senate during the current special session, and two versions of the bill are in the queue of bills in the House Finance Committee. Legislative leaders have indicated support for the measure even though no action has been taken on either roads bill since May 24.

What’s front and center for the conference committee members to decide is the means by which the state will generate the $125 million difference between the agreed upon operating budget and the estimated revenue for 2018.

Legislative leaders tentatively have agreed with Justice to increase the state’s sales tax to 6.35 percent and decrease the income tax in three stages. The first stage would decrease the tax by 7 percent in fiscal year 2018.

They’ve also agreed to decrease the income tax by another 7 percent if certain fiscal, population or other economic thresholds were met in a subsequent fiscal year or if an average threshold was met during about five years. From there, it would decrease by another 6 percent if other thresholds were met in a yet-to-be-determined time frame.

As to what those thresholds would be was a point of disagreement among legislative leaders and something the conference committee would have to address.

Conference committees are appointed when members of both chambers are unable to reach an agreement on a bill that has passed both chambers but with some differences.

The Senate president and House of Delegates speaker can appoint committees from their respective chambers to represent their interests.

If conference committee members reach a consensus, they’ll report their agreement to the members of their respective chambers. The members of the House and Senate will then vote on whether to accept the report, which will represent the final version of the bill.

The conference committees for HB 107 consist of five members from each legislative body, three Republicans and two Democrats to each committee.

Representing the Senate are Majority Leader Ryan Ferns, R-Ohio, Craig Blair, R-Berkley, Ed Gaunch, R-Kanawha, Minority Leader Roman Prezioso, D-Marion, and Glenn Jeffries, D-Putnam. Representing the House were Finance Committee Chairman Eric Nelson, R-Kanawha, Majority Whip Carol Miller, R-Cabell, Paul Espinosa, R-Jefferson, Brent Boggs, D-Braxton, and Dave Pethtel, D-Wetzel.

Senate President Mitch Carmichael, R-Jackson, said Wednesday it was “unfortunate” that revenue negotiations had gotten to this point, but he was hopeful for a budget resolution very soon.

“It’s a frustrating process,” Carmichael said. “We are going to work through it and get there and provide a budget that’s good for the people of West Virginia.”

Fiscal year 2018 begins July 1, 2017, and the state government would shut down if a budget isn’t passed.

On May 15, Justice’s chief of staff, Nick Casey, said a budget needed to be in place by June 19, 2017, to make the necessary accounting and system adjustments to start a new budget year.

The cost for the legislative session is about $35,000 per day if every lawmaker is present in both chambers when both legislative bodies convene.

The Senate will reconvene at 11 a.m. Thursday, and the House will reconvene at 3 p.m. Thursday.

 West Virginia Tax Reform Act of 2017

The 10-member conference committee on House Bill 107 will meet again at 9 a.m. Thursday, June 8, at the West Virginia Capitol. Here are some points of agreement and disagreement they are expected to discuss:

Sales tax

A tentative agreement between Gov. Jim Justice and legislative leaders would increase the sales tax rate to 6.35 percent. Versions of the bill have provided that West Virginians begin paying sales tax on telecommunication services and devices, health and fitness memberships, digital services and goods communication services (except broadband), labor in construction services and primary opinion research.

Coal severance tax

The Senate’s version of the bill had established a graduated coal severance tax rate based on the type and quantity of coal mined. The House’s version of the bill made no changes to the existing coal severance tax structure.

Income tax

The tentative agreement between Justice and lawmakers has a “7-7-6” decrease of the income tax. The tax would decrease 7 percent in fiscal year 2018. It would decrease another 7 percent during a later fiscal year if certain economic events trigger it. It subsequently would decrease 6 percent in another fiscal year pending certain triggers. The events that trigger the last two decreases have not been determined by lawmakers.

Lawmakers are in agreement that the income tax on military veterans’ retirement income will be eliminated. They also are in agreement to eliminate the income tax on federal Social Security benefits for households earning below a certain annual income. The income amount and the time frame to phase out the Social Security income tax have not been agreed upon.

Tax commissioner

The bill would give the West Virginia tax commissioner certain rule-making authority in the event of an emergency. Leaders in both parties have agreed to this measure.

Historic structure tax credit

The bill increases the rate of the tax credit for restoring historical buildings from 10 percent to 25 percent of the total expenditures of the project as long as the person or company responsible for the project is up to date on their taxes. There is some disagreement as to the actual dollar amount that can be recovered through the credit.

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