By JANET METZNER
The Intelligencer/Wheeling News-Register
CHARLESTON, W.Va. — Changing West Virginia’s tax structure from income tax to general consumption tax is officially up for consideration in the Legislature.
Taxing the selling, purchasing or use of goods and services should replace the current outdated income tax, Senate President Mitch Carmichael told local government officials Sunday at the West Virginia Municipal League’s Mid Winter Conference.
“Most economists will tell you: ‘Do not tax the productivity, tax the consumption,’” he said in favor of the proposed switch to the consumer sales tax-structure that’s proposed in Senate Bill 355, which was introduced Thursday.
“It incents jobs growth and opportunity for our citizens,” he said.
On Sunday, Carmichael and House Speaker Tim Armstead stressed the importance of the bill in balancing the state’s Fiscal Year 2018 budget, and making up for its anticipated $400-$450 million shortfall.
Gov. Jim Justice, by contrast, has offered a solution that relies mostly on taxes and fee increases.
The bill is the product of a legislative committee on tax reform that has been studying options for two years, Armstead said.
Generally, it repeals the state’s personal income tax, in favor of a general consumption tax. Meanwhile, it also repeals the current consumer sales and service tax so that some current exemptions to the tax are eliminated. This includes professional services such as legal, architectural, accounting and more.
It has 19 co-sponsors, including Carmichael, as well as its lead sponsor Sen. Robert Karnes, R-Upshur.
The bill defines the proposed tax structure as “the general consumption tax law.”
It’s based on the idea that “in the free enterprise system, the best judge of a purchaser’s ability to pay, for the purchaser of goods and services, is the purchaser, and, thus a broad-based consumption tax is firmly based on that principle of sound and fair taxation,” the bill states.
The bill adds a lengthy section to state code and makes changes to numerous other sections.
It states that all vendors, purchasers and other people benefit from the government’s goods and services, and therefore they should pay for those services.
But tax rates on each type of vendor, purchaser and others could vary based on their participation in the marketplace.
Exemptions would be government purchases; purchases for charitable, educational and public safety purposes; and “purchases of goods and services by individuals for health care which are predominately paid or reimbursed by third parties — including the government,” it states.
Some specific examples of exemptions in the proposed legislation include: school textbooks; most government purchases; certain sales to churches; sales to 501 C-3 non-profit or charitable groups; youth organizations; membership fees; prescription drugs and insulin; sales between related business entities; certain purchases of food, including by schools; and more.
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