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Senate Tax Reform Committee ready with tax overhaul


The State Journal

CHARLESTON, W.Va. — Members of the West Virginia Senate’s select committee on tax reform voted on a final state tax overhaul proposal on Monday, March 13 after several meetings to tweak the bill.

The committee, appointed by Senate President Mitch Carmichael, R-Jackson, and chaired by Sen. Robert Karnes, R-Upshur, had hoped to come up with a bill both creating a broad-based statewide consumption tax and eliminating the state’s income tax. Seven states currently do not have a tax on earned income.

But committee members were forced back to the drawing board after deputy state revenue commissioner Mark Muchow told them their original plan could end up costing the state upwards of $1 billion a year in lost revenue.

The latest version of the legislation, known as Senate Bill 335, would call for an 8 percent consumption tax on most goods and services bought and sold in the state, including food, and a flat 2.5 percent income tax for state residents. The income tax could be phased out between 2023 and 2032 if the revised tax structure were to meet certain revenue milestones.

A version of the bill discussed on Saturday, March 11 included a 2.65 percent income tax. Revenue projections showed that legislation creating a budget surplus of more than $300 million the first year, but quickly dropping off after that.

There have been 35 changes made to the bill since its first iteration. Changes discussed Monday included an earned income tax credit for families who make less than a set amount of money, and a tax credit for senior citizens on fixed incomes. Committee members also added a tax exemption for veterans’ retirement benefits, as suggested recently by Gov. Jim Justice.

The committee considered a further four-part amendment on Monday.

Under the provisions of the amendment, the bill would eliminate Social Security income from taxation. That change would cost the state about $90 million a year in revenue.

To help offset the effects of the Social Security exemption, the amendment also proposed raising the state’s soda tax from one cent to five cents, with an expected revenue stream of about $60 million a year; raising the markup on wholesale liquor from 28 percent to 36 percent for an estimated $13 million a year and raising the beer barrel tax from $5.50 to $11.

Carmichael and House Speaker Tim Armstead, R-Kanawha, announced a budget plan on Monday that would raise the liquor markup to 32 percent and the beer barrel tax to $8.

Even by adding some tax exemptions, and restoring some of the consumption tax exemptions from the original bill, Karnes said the legislation still remains essentially revenue-neutral.

Committee members voted to pass Senate Bill 335 on to the finance committee for further consideration.

Meanwhile, the House of Delegates has introduced its own tax reform bills. One of the pieces of legislation would lower the state sales tax from 6 percent to 5.5 percent, but remove many of the current sales tax exemptions. The other bill would create a flat, 5.1 percent state income tax.

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