By JOSELYN KING
The Intelligencer and Wheeling News-Register
WHEELING, W.Va. — A proposed 20-percent decrease in West Virginia’s income tax rate — offset largely by a 1-cent-per-dollar increase to the state’s sales tax — is expected to be on the desks of West Virginia lawmakers today as they return to Charleston for a special session to set the state’s 2018 budget.
If approved, changes to West Virginia’s tax structure could save taxpayers an estimated $140 million annually, according to Senate Majority Leader Ryan Ferns, R-Ohio.
But taxpayers also could be paying much higher taxes on their cellphone use and other services not presently subject to tax.
“My understanding is the governor has accepted almost entirely the Senate’s tax reform plan — which works toward eliminating the income tax,” Ferns said. “It starts by reducing the income tax this year by 20 percent, and this would be offset by raise in sales tax and a few other minimal taxes as a compromise.”
The 20-percent decrease in the income tax is expected to cost the state about $400 million in the first year, while increases in the sales tax and other taxes would bring in about $260 million, Ferns said. The result would be a savings to taxpayers of about $140 million the first year.
In addition to the sales tax, other increases to be considered include a 1-percent increase in the corporate net income tax paid by larger corporations, and a temporary “millionaire’s tax” on West Virginians with $300,000 or more in taxable annual income.
Closing loopholes such as sales tax exemptions also is included in the proposal, and this would result in a sales tax on telecommunications devices, Ferns said.
An agenda for the special session released by Justice Wednesday afternoon indicates four bills will go before lawmakers.
The first bill pertains to revenue-increasing items, and there will be discussion of items pertaining to income tax reduction, military retirement exemptions, the consumer sales tax, the corporate net income tax, a “Wealthy West Virginian Tax,” coal and natural gas severance tax reform and historic tax credits.
The second measure focuses on road funding, and indicates an increase in West Virginia’s gasoline tax and motor vehicle registration fees could be in the future. During the recent regular session of the Legislature, Justice proposed the state’s gas tax be increased from 20.5 cents to 25 cents per gallon, and that the registration fees be increased from $30 to $50 annually.
The third bill deals with the West Virginia Parkways Authority. Justice has previously asked lawmakers to consider eliminating tolls for state residents traveling the West Virginia Turnpike in favor of an $8 flat fee for all residents.
The fourth piece of legislation, meanwhile, would provide a 2-percent pay raise for teachers.
“My position — and the Senate’s position — is to lower taxes for West Virginians, and our primary goal is to lower the income tax,” Ferns said. “Research shows that is what leads to the most economic growth. … I think this will have bipartisan support.”
Sen. Ryan Weld, R-Brooke, said the only way he would agree to a tax increase is if the Senate’s plan to eliminate West Virginia’s income tax is involved in the process. A measure pushed by the Senate this year would have decreased the number of income tax brackets in the state from five to three.
“We’ve seen several studies in several states where they have reduced income tax rates, and this has led to economic growth,” Weld said. “People are going to live where there is no income tax. People move to Florida not just because of the weather — it’s because they have no state income tax.”
House members have largely been opposed to any increase in taxes.
“A 1-cent sales tax increase can be troublesome for bordering counties like ours,”said Delegate Shawn Fluharty, D-Ohio. “However, it is a much better alternative than the broad consumption taxes that have been proposed which would drive businesses to our neighboring states.”
Fluharty said he would have to see a breakdown of who benefits most from the tax cuts before deciding whether or not to support them.
Delegate Patrick McGeehan, R-Hancock, disagrees that the proposal represents a reduction in state taxes.
“Only sordid characters based in ignorance or deception could refer to this proposed plan as a tax cut,” he said. “The plan calls for increasing sales taxation, and then applying this new higher sales tax rate to a host of new small-business services which are currently not taxed at all. Cellphones, landline telephones, accounting services — all would now be slammed with a higher sales tax, while the existing items which are currently taxed would also get hit with a higher taxation rate. Moreover, sales taxes on gasoline at the pump would go up by eight more cents a gallon, while fees paid at the DMV would be forced up by about double their current rates. The plan also calls for an increase on business taxes. All of these higher taxes would go into effect almost immediately.
“By a sleight of hand though, the plan is promising to reduce the income tax in the future,” McGeehan continued. “This reduction would not go into effect until next year, and that would only take place if all sorts of vague criteria would first be met, such as if the state’s economy grows and other ‘triggers’ built-into this convoluted plan. Even if these do called ‘triggers’ would be met, they would just alter the criteria in the future to ensure high taxes remain. This is purposefully done though, so politicians can tell the public they are cutting taxes, when they are doing precisely the opposite.”
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