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Senate faction proposes income tax triggers based on rising sales tax revenue

By RUSTY MARKS

The State Journal

CHARLESTON, W.Va. — Republican leaders involved in a conference committee to work out a compromise on a West Virginia tax and revenue bill have proposed rolling back income tax rates based on increases in sales tax revenue.

West Virginia Gov. Jim Justice addresses a conference committee set up to work out a tax and revenue compromise.
(Photo by Perry Bennett/West Virginia Legislative Photographya

The committee is considering a tax and revenue bill that would raise the state sales tax from 6 to 6.5 percent and remove several sales tax exemptions, while reducing personal income tax rates by 20 percent over three years.

The proposed bill would lower income tax rates by 7 percent this year, then by 7 percent the following year and 6 percent the year after that if certain triggers are met. What those triggers will be is still under discussion.

However, conference committee chairman Sen. Ryan Ferns, R-Ohio, proposed Thursday, June 8, triggering the second income tax rollback if and when sales tax revenues grow by more than $80 million. The next reduction would be triggered if sales tax revenue grows by another $40 million.

Triggers for rolling back the personal income tax have been a sticking point in revenue and budget discussions. Senate Republicans and Democratic Gov. Jim Justice want to roll back or completely eliminate personal income taxes, believing It would spur growth. But House Republicans and Democrats in both the House and Senate are more leery of reducing income tax revenue while the state is in financial crisis.

Mike Muchow, deputy revenue secretary, said the increase in the sales tax would offset the revenue lost from rolling back income tax rates the first year. But after that, he said the state would have to experience 7 percent growth to make up for the lost revenue. Since 1990, West Virginia has experienced growth of 7 percent or more only four times.

Justice took the unusual step of addressing the conference committee Thursday morning, answering questions and urging senators and delegates to come up with a compromise on the tax and revenue bill.

Conferees returned to the budget negotiating table Friday, June 9. Income tax triggers and income tax brackets have still to be determined.

But parts of the tax and revenue plan that have been generally agreed to include:

— Exempting military pensioners from paying income tax.

— Completely exempting income tax on Social Security income for those who make less than $50,000 a year after two years.

— Removing sales tax exemptions from telecommunications, digital goods and services, electronic data processing, health and fitness memberships, primary opinion research and sales used in communications, except for broadband expansion.

— Raising the personal income tax deduction from $2,000 per person to $2,500 per person.

— Increasing the tax credit for those restoring historic buildings.

— Sales taxes on digital goods and services would not apply to online classes or textbooks, however.

Once out of conference committee, the tax and revenue bill will still have a hard sell. Many Democrats in both the House and Senate are opposed to reducing the income tax until the Mountain State is in better shape financially, and some House Republicans are skeptical of the deal.

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