8 Ways Lawmakers Could Balance W.Va.'s Budget

Mar 29, 2016

Two weeks after the Legislature left Charleston without approving a budget for the 2017 fiscal year that begins July 1, the West Virginia Center on Budget and Policy is urging lawmakers to not just consider cuts when they return to complete the funding bill.

"West Virginia should take a balanced approach that includes additional revenue rather than a cuts only approach that could threaten our state's struggling economy," Ted Boettner said Monday.

Boettner is the Executive Director of the West Virginia Center on Budget and Policy, a left-leaning think tank based in Charleston that often studies budgetary issues in the state.

Each year, the group releases a detailed analysis of the governor's budget proposal as well as analysis of the budget ultimately approved by lawmakers. This year, however, a budget has yet to be put to a vote so Boettner and his lead policy analyst, Sean O'Leary, penned eight recommendations for lawmakers when they return for a special budget session in the coming weeks.

  1. Apply the sales tax to digital downloads: Boettner says its unfair that West Virginia retailers should be charged for purchases of movies or music when online operators are exempt. The change could bring in an estimated $10 million per year.
  2. Apply the sales tax more widely to personal services: Barbor shops, salons, tattoo parlors, and private fitness centers among other service business are exempt from the state's 6 percent sales tax. The WVCBP estimates closing the loopholes could bring in nearly $6 million annually.
  3. Scale back personal income tax exemptions: West Virginia provides all residents with a personal income tax exemption of $2,000. Boettner says abiding by the federal standard and phasing out the exemption for households with joint incomes of more than $150,000 and eliminating the credit for households making $200,000 would bring in nearly $10 million.
  4. Modernize Personal Income Tax Rates and Brackets: The WVCBP recommends lawmakers create an additional tax break for earners who make more than $150,000, assessing a 7.4 percent tax that would result in nearly $45 million in annual income for the state.
  5. Increase tobacco taxes: Boettner backs the Senate approved increase of $1, bringing in $139 million in revenues, but also, according to Boettner, reducing health related costs into the future as more people, especially teens, are deterred from smoking.
  6. Enact a higher severance tax on natural gas liquids and/or natural gas: Despite a Senate approved proposal to decrease the tax by 2 percent over two years, Boettner proposes doubling the tax rate on natural gas liquids from 5 to 10 percent and increase the 5 percent rate on natural gas to 6 percent, bringing in a combine $36 million in the next fiscal year.
  7. Apply the sales tax to telecommunications services: Another Tomblin proposal that went nowhere in either chamber, the WVCBP recommends implementing the 6 percent tax on both cell phone and land lines generating $60 million per year in revenue.
  8. Increase the Soda Tax: Another proposal meant to increase both revenues and health outcomes, Boettner suggests lawmakers bump the various soda taxes for $50.5 million in additional funds brought in each year.

Although the proposal wouldn't bring in any additional revenue, Boettner and his staff are also backing the implementation of an Earned Income Tax Credit. 

Twenty-six states and the District of Columbia have such credits which returns tax dollars to low-income, working families, but the recommendation could cost the state some $47 million.

The WVCBP report also passes over what Senate Finance Chair Mike Hall has said is "the most stable" source of revenue for state governments, a food tax, a tax West Virginia lawmakers phased out in the past decade leaving a hole in the state's budget. 

Boettner said the tax break does not necessarily target relief to low-income families because many are exempt from taxes through government assistance programs.