State tax reform bills draws opposition
PARKERSBURG — A bill changing the tax system in West Virginia has its skeptics.
Senate Bill 335 would eliminate the 6 percent sales tax and replace it with an 8 percent general consumption tax, including food, lower the income tax rate to 2.65 percent with a method to eliminate it around 2032, repeal the corporate net income and change the severance taxes on coal and natural gas.
The consumption tax on sales would make West Virginia the highest compared to surrounding states and encourage consumers to go across state lines, said Steve Roberts, executive director of the West Virginia Chamber of Commerce.
“Actually, we’re very concerned about this proposal,” Roberts said.
Taxing unprepared food and food ingredients would be effective Jan. 1. The sales tax on food was phased out in 2013.
“I think that’s wrong,” said Jim Oppe, owner of local Foodland stores in West Virginia.
Oppe said he understands the severity of the state’s financial situation, facing a projected $450 million deficit in the upcoming fiscal year, but food is a necessity. Everyone will be hurt and hurt the lower wage earners the most, he said.
“You have to eat,” Oppe said.
A family of four can spend from $125 to $150 a week on groceries, he said. Add $10 to $12 additional for taxes a week and it adds up in a year, he said.
When the tax on food was lifted, stores in West Virginia started seeing customers from Ohio, Oppe said.
“It made a difference when we took the 6 percent off,” he said. “All we’re doing is driving (customers) across the border.”
Gil White, state director of the National Federation of Independent Business in West Virginia, said while eliminating the personal income tax would impact small-business owners, the organization has “big concerns” about replacing the 6 percent sales tax with an 8 percent general consumption tax.
“That would essentially raise the sales tax by 33 percent, and that would have a tremendous impact on people’s buying power,” White said. “It also would put West Virginia retailers along the border at a real competitive disadvantage.
“None of our neighboring states has a sales tax approaching 8 percent on the dollar. If you live near the border of Kentucky, Ohio, Pennsylvania, Maryland or Virginia, and you could save hundreds of dollars by driving a few miles across the state line, you would,” he said in a statement. “That’s going to hurt retailers along the border, and that, in turn, is going to (put) less money in state coffers.”
SB 335 was reported out of committee March 13 by the Senate Select Committee on Tax Reform. It was sent to the Finance Committee.
“I believe in the Senate it’s been very well received,” said state Senator Robert L. Karnes, R-Upsher, lead sponsor and chairman of the Senate Committee on Tax Reform. “In the House it’s a little bit more mixed.”
Half of the 34 members of the Senate are sponsors, including state Senator Mike Azinger, a Republican from Wood County, Karnes said.
The chamber is receptive to listening to all budget proposals, however, improvements already made to the tax structure in West Virginia shouldn’t be reversed, Roberts said. Some national groups have cited how competitive West Virginia has become, he said.
According to the fiscal note from the state Department of Taxation to the original legislation, changes in the consumption tax and the income tax would increase revenue from $550 million in 2018 to $610 million in 2021, but after the first four years there would be a net general revenue fund decline of $870 million. Amendments by the Tax Reform Committee addressed that shortage.
“The proposed bill represents the most massive tax reform effort of any state in recent memory. Most states commit significant resources toward adequate measurement of tax reform impact on businesses and residents prior to adoption of a significant change,” the fiscal note said. “The resources and time frame for the preparation of this fiscal note are woefully inadequate to properly measure the cumulative extent of all consequences associated with proposed changes. It is presumed that one of the possible objectives behind this proposed bill may be greater economic growth over time.”
Lawmakers are asked “to be very cautious before they completely upset the tax system we have in West Virginia,” Roberts said.
(Mancini can be contacted at email@example.com)