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Senate wants to set higher sales tax: Pitch of 7.25 percent tax made Monday

By JOSELYN KING

The Intelligencer and Wheeling News-Register

WHEELING, W.Va.  — Changes made to a tax reform bill by a West Virginia Senate committee Monday would increase the Mountain State’s sales tax to 7.25 percent, setting the stage for a probable conference committee with the House as lawmakers continue to work out a 2018 state budget.

West Virginia Senate Majority Leader Ryan Ferns, R-Ohio, speaks with Sen. Ed Gaunch, R-Kanawha, before a Senate Select Committee on Tax Reform meeting Monday at the Capitol.
(Photo by Perry Bennett, West Virginia Legislative Photography)

Monday marked the sixth day in the Senate of a special session for the purposes of crafting and passing next year’s general fund budget. The House was not in session, but returns today for its eighth day in special session.

The last act by the House on Friday was to pass House Bill 107. The measure eliminated a proposal by Senate Republican leadership and Democratic Gov. Jim Justice to increase the state sales tax from 6 percent to 6.95 percent. It also established a three-year plan to eliminate taxation on Social Security income in the state for those earning less than $100,000 annually.

The Senate Select Committee on Tax Reform on Monday approved HB 107, but with notable changes.

Members inserted a provision increasing West Virginia’s sales tax to 7.25 percent. Counsel explained each additional penny on the dollar is expected to generate an extra $200 million annually, meaning increasing the sales tax from 6 percent to 7.25 percent would bring in an additional estimated $250 million to the general revenue fund each year.

The money would be used to offset the cost of keeping the House’s plan to eliminate taxation on Social Security income, though the committee reduced the eligibility requirement to $75,000 in income annually.

The measure also would increase the corporate net income tax from 6.5 percent to 7 percent, but the hike would sunset in three years.

West Virginia’s tax code presently has five income tax tiers, and the House bill approved would have changed that to four tiers. The Senate on Monday amended the bill, reverting it back to its original plan for three tax brackets.

HB 107 still exempts veteran retirement pensions from taxation.

Republicans on the committee said they had compromised on past plans for tax reforms this special session, thinking it might lead to bipartisan support for tax reform. But the prior tax reforms bills were rejected by the House without consideration.

The measure next moves on to the Senate Finance Committee for approval. The full Senate is scheduled to next convene at 9:30 a.m. today, and a meeting of the Finance Committee is expected to take place immediately after a brief floor session, said Senate Majority Leader Ryan Ferns, R-Ohio.

It is likely HB 107 would be advanced during that committee meeting, then sent to the full Senate for approval at 11 a.m. Ferns expects the Senate to dispense with the three-day reading rule and take a vote for passage “in an effort to save taxpayer time and dollars.”

The House is set to convene at 4 p.m.

“I think it will go to conference committee,” Ferns said. “This is an improvement, because before we couldn’t even get them to consider anything to go to conference committee and reach a compromise. The fact we sent it back in any form is a positive thing.”

But Delegate Shawn Fluharty, D-Ohio, said the proposed increase in the sales tax to 7.25 percent is “absurd,” and the amended measure won’t be accepted by the House.

“I think the senators forget where they live,” he said. “They need to understand we compete with our neighbors. They want a sales tax that puts us up there with California’s, and we’re not going to be able to compete.”

Fluharty said the House version of the revenue bill would benefit older West Virginians who are at lower earning levels.

“Meanwhile, the Senate is dead-set on giving millionaires and billionaires a tax break, leaving our elderly out of consideration. I don’t think it has a chance in the House.”

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