Both the House and Senate will be presented with their respective 2018 budget plans on the floor Wednesday, and in the House, that budget will rely on nearly $140 million in new revenue.
The revenue comes from getting rid of certain exemptions to the state’s sales tax in an effort to lower the overall rate down the road.
As it came out of the Senate, Senate Bill 484 would have captured some $12 million a year in taxes paid on some road construction materials and kept them in the general revenue fund for legislative appropriation.
While the bill still contains that provision, the House Finance Committee made significant changes to the bill over the weekend, which were narrowly accepted by the body during a Tuesday evening floor session.
“One of the things that we learned in tax reform that we’ve been studying for the last two years is that you want to reduce your rates to the point that you have a competitive advantage,"House Finance Committee Vice Chair Eric Householder said, "and if you want to broaden out your sales tax base, broaden it out slowly, and that’s what we’re doing here tonight.”
The House Finance Committee amendment broadens the base of taxable goods and services and lowers the overall rate.
It gets rid of the exemptions on a number of services in two phases, July and October this year.
In July 2018, the amendment calls for a reduction of the state’s 6 percent sales tax to 5.5 percent, then to 5.25 percent in July 2019. After that date, the the tax rate would drop by a quarter of a percent each year if the sales tax revenues for the previous fiscal year exceed the 2017 incomes. The rate could not be reduced, though, below 4.75 percent.
“West Virginia’s tax structure is pushing jobs and people away from this state. We cannot expect our economy to grow if we do not provide a system that will allow for growth," he said. "Broadening the sales tax base and lowering the rate is a good idea and it’s a move in a direction of sound tax policy.”
Several members of the House leadership team joined Householder in speaking in support of what they’re calling a tax reform measure, but Republican Del. Michael Folk called the bill a tax increase.
“People in this body and on this side of the aisle want to get out of here so bad, they’re willing to stick it to the taxpayers,” Folk said.
A number of Democrats expressed concerns about the provision, including House Minority Leader Tim Miley.
He said the amendment only increases taxes on West Virginia consumers and does not include a sacrifice from the business community.
Democratic Gov. Jim Justice is pushing for a small business tax increase—which the West Virginia Chamber of Commerce supports.
“Nothing in here reflects to me a sacrifice being made by the business community in this state, the same community that has indicated very publicly that they are willing to help pull the rope," Miley said, "and so unless and until we have a comprehensive plan in which the business community has buy in and makes part of the sacrifices with the citizens in this state, I think we should reject this approach.”
The amendment was accepted on a 53 to 46 vote in the chamber.
The amended version of Senate Bill 484 will be up for a final vote Wednesday.