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Editorial from The Exponent Telegram: HB 2704 – Will lawmakers stand behind “no new taxes” claim?

From The Exponent Telegram of Clarksburg:

On Saturday, the House Finance Committee passed a bill that would place a 5.5 percent sales tax on services ranging from legal fees, to hair cuts, tax preparation, advertising sales and your pets’ visits to the vet.
House Bill 2704 also calls for the general state sales tax to be rolled back to 5.5 percent as an inducement, creating the mirage that residents could be paying less in taxes while businesses would pay more. Lawmakers even dubbed it the “West Virginia Tax Decrease Act of 2016.”

But reality is that any business that has to begin paying an additional 5.5 percent to the state will pass those costs onto consumers, which means House Bill 2704 is really a 5.5 percent tax increase.

And because the tax will lead to businesses having to pay other businesses for services, there is a heightened risk of all businesses having to raise prices to offset the added expense.

If there was any doubt that lawmakers are fearful voters will figure this out, one only has to study the way the process to get the bill where it is today unfolded. That process shows that an effort to keep the public in the dark as long as possible was in play.

First, the committee used a Saturday morning meeting to pass the bill to the full House. Then, it took the original three-page bill and amended it with 27 additional pages, catching some committee members off guard and unprepared.

The committee also used a voice vote instead of an official roll call vote to cloud just who supported the bill’s passage.

A bill of this magnitude should have significant study and input to give all stakeholders a chance to be heard. The bill should have been introduced early in the session so it could be fully vetted, instead of trying to slip it through just in time for “cross over day.”

This is not open and transparent government and we’re surprised Speaker Tim Armstead, R-Kanawha, allowed this to happen.

Now that the bill is in the full House, we’re hopeful lawmakers, including those who represent businesses and families in North Central West Virginia, will wise up to the bill’s potential harm.

As outlined in a position paper by the West Virginia Press Association, which opposes the bill, House Bill 2704 would:

— Stifle small businesses that will be forced to raise prices. Already battling bigger businesses for their share of the market, small businesses will feel a greater negative effect from the new tax.

— Force consumers to pay more for services, as the tax burden will be passed on to the buyer, tax experts agree.

— Not create any savings for residents, despite the “drop” of the general sales tax from 6 to 5.5 percent. Because more goods and services are taxable, residents will pay more in taxes.

— Give bigger corporations with out-of-state offices potential loopholes to avoid paying the tax by moving the transactions to an out-of-state location. That would put West Virginia businesses at a major disadvantage.

— Make West Virginia the only state to tax advertising, creating situations where businesses can’t afford to promote their goods and services, which could subsequently have a negative impact on sales. The trickle-down effect would actually hurt state tax collections.
With these facts in mind, state lawmakers should quickly end any discussion of adding new taxes — something that the majority of lawmakers have said they unequivocally oppose.

Now it’s time to see if they’ll stand behind their “no new taxes” claim or if they’ll impose a new law that will hinder — not help — economic development.

Hopefully, they’ll do the right thing and oppose HB 2704. If not, hopefully voters are watching and waiting for election day.

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