By PHIL KABLER
CHARLESTON, W.Va. — Prospects were in doubt Monday for West Virginia House and Senate bills to lower state income tax rates, making up for lost revenue with sales taxes expanded to cover groceries and several professional and personal services that are currently exempted.
The Senate Finance Committee postponed consideration of a bill that would cut income tax collection by more than $520 million in its first year but would raise nearly $450 million a year with a 7 percent sales tax and with a 3.5 percent tax on food (SB 409).
“There’s a lot of unanswered questions and concerns,” Senate Finance Chairman Mike Hall, R-Putnam, said in laying over the bill Monday.
Several senators raised concerns that the bill shifts the tax burden from the wealthy to middle-class consumers, and while it adds about $61 million in revenue in the upcoming budget year, it would create future revenue shortfalls in the following years.
Sen. Doug Facemire, D-Braxton, called the proposal “almost comical.”
“We’re putting all the burden on the middle class while helping people making over $100,000,” Facemire said. “Why would we even waste our time with a bill like this?”
Michael Caryl, a tax attorney and state tax commissioner under Gov. Arch A. Moore Jr., told the committee he believes the lower income taxes will spur economic growth.
“I’m a big believer that a broad consumption tax is a far better way to make money for the state than an income tax,” he said.
A similar bill was pending on the House floor (HB 2933). It would set a flat income tax rate of 5.1 percent, while also broadening sales tax collection by eliminating several exemptions for personal and professional services, as well as for telecommunications services. Unlike the Senate bill, which raises the tax to 7 percent, the House bill would lower the sales tax rate to 5 percent, beginning July 1, 2018.
However, the proposal has drawn objections from conservative Republicans and Democrats in the House, who, on Saturday, joined forces to come within six votes of rejecting the bill on its first reading.
The bill has 17 proposed floor amendments pending on second reading.
Gov. Jim Justice said Monday that he opposes both versions of the sales tax increases.
“It puts too much of a burden totally on the people that can stand it the least, and helps people like me. Why in the world would we want to do it today?” Justice said of the bills’ shifting of tax burdens from business and upper-income individuals.
The governor has said he would ultimately like to pare down or eliminate income taxes, but he said this is not the time to do so.
“I believe that’s getting the cart before the horse. That’s step two or three down the road,” he said.
However, Justice said he is encouraged by the budget proposal offered in the House Finance Committee on Saturday, saying it shows “movement in philosophy” on the Legislature’s part.
“I’m optimistic we’re going to get a deal done,” he said.
Justice met privately Monday with House and Senate leaders, and with Senate Democrats, to discuss possible budget compromises.
The budget plan discussed in House Finance on Saturday would set general revenue spending at $4.27 billion, about $180 million less than Justice’s proposed budget.
The House plan increases revenue by about $215 million, including $158 million from the House version of legislation to raise more sales tax revenue.
Justice said the House proposal recognizes that the $500 million shortfall in the 2017-18 budget cannot be resolved with spending cuts alone.
“We can’t cut our way to prosperity,” he said. “We’ve got to have additional revenues.”
Justice said he still believes his plan to increase revenue by about $350 million is fairer, spreading out the tax burden over business, consumers and the wealthy while reducing unnecessary spending and government waste.
He said there should be one prevailing issue in putting together the 2017-18 budget plan: “Are more people going to come here, or are more people going to leave?
“I think we can put that together in a way that doesn’t cut to the bone, and drive more people away,” he said of the budget bill.
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