Sales tax increase in debate

WHEELING – A Cabell County lawmaker has proposed temporarily adding 1 percent to the state sales tax to keep West Virginia’s budget balanced as state officials expect a couple tough years ahead.

Democrat Delegate Jim Morgan on Tuesday introduced a bill to increase the state’s sales tax from 6 percent to 7 percent for four years. The measure would expire June 30, 2018, and would not reinstate the sales tax on groceries – which was phased out over time and eliminated entirely last year.

Delegate Randy Swartzmiller doesn’t expect the bill will gain much traction. He said the measure was intended as a statement against a proposal advanced by Gov. Earl Ray Tomblin that would cut a number of annual lottery revenue distributions by 15 percent – including payouts to city and county governments as well as subsidies for the the horse and dog racing industries – to help balance the budget.

“That bill isn’t going to go anywhere,” Swartzmiller, D-Hancock, said. “Jim Morgan was saying, ‘Look, this is where we can find it without taking it from here, here and here.’ … He was making more of a statement than anything.”

West Virginia expects to pull in $1.2 billion in sales tax revenue this year, which accounts for about 30 percent of its overall $4.1 billion revenue projection.

A 1-percent sales tax increase could generate about $200 million in additional revenue each year – more than enough to close the state’s projected $146 million budget shortfall for the 2014-15 fiscal year.

It also would replace lost revenue from elimination of the food tax, which according to the state Tax Department will cost the state an estimated $174 million each year.

Delegates Phil Diserio, D-Brooke, and Ronnie Jones, D-Hancock, aren’t sure whether a sales tax increase is the answer to the state’s budget problems, but they won’t support the governor’s lottery revenue plan.

“It’s not only threatening jobs, but it’s threatening the distribution of money to other agencies,” Diserio said. “No one likes to raise taxes, but I have to weigh heavily between people losing jobs and the other options that are out there.”

Delegate Mike Ferro, D-Marshall, said it’s too early for him to decide where he stands on a potential sales tax increase. However, he is concerned about the effect of cuts to local communities, the racing industries and other state agencies that have had to deal with budget reductions.

“I’m going to keep my mind open on everything and see how things play out as it goes along. A lot of agencies have been contacting us about the cuts, and it’s a very difficult thing to listen to, when your friends may lose their jobs,” Ferro said.

Delegate Erikka Storch, R-Ohio, said she would not support any sales tax increase.

Delegate David Evans, R-Marshall, said roads and infrastructure are critical needs for the state, and he would find it difficult to support a sales tax increase bill that doesn’t spell out how the additional money will be spent.

But with a tough couple of budget years ahead, Evans knows money will have to come from somewhere.

“We’re going to have to go into the Rainy Day Fund in order to pay some bills. I don’t like that either,” he said.

If the sales tax increase passes, the rate in Wheeling would go to 7.5 percent, including the 0.5-percent municipal sales tax Wheeling City Council enacted last year.

One of the selling points for city officials was that the city’s effective rate of 6.5 percent would keep it competitive with neighboring counties. But that advantage would disappear with an additional 1-percent increase – the sales tax rates in Belmont, Jefferson and Monroe counties stand at 7.25 percent each, while Allegheny County, Pa., charges 7 percent.

Wheeling Mayor Andy McKenzie also does not expect the sales tax proposal to go anywhere this year. He said any tax increase would be difficult to pass in the House, where Republicans hold 47 of 100 seats.

Morgan’s proposal is House Bill 4456.