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House Finance Looks at 2 Tax Reform Measures

Members of the House Finance Committee are expected to get their first look at the chamber’s budget for the 2018 fiscal year in a meeting this Saturday. In order to balance it, lawmakers will have to close an estimated $497 million hole.

To close the gap, Republican legislative leaders are largely looking to cut state spending, specifically in public education, higher education, and Medicaid, but on Friday, House Finance Committee members considered some new revenue increasing measures, or tax increases.

The House Finance Committee considered a committee substitute for House Bill 2816.

The bill would eliminate the West Virginia film tax credit – an annual $5 million cap awarded by the West Virginia Film Office to attract movie producers to the state. That elimination is one Democrat Jason Barrett, of Berkeley County, opposes.

Barrett says Berkeley and Jefferson Counties have hosted several Discovery Channel and National Geographic film shoots in recent years.

“This film tax credit brings people to the state of West Virginia; people who have never been here before, and probably wouldn’t come,” Barrett explained, “This brings them into our state; it allows them to see the beauty of West Virginia, not only in the Eastern Panhandle but the entire state.”

But the bill does a lot more more than just eliminate the tax credit. It also ends a transfer of some $12 million from the general revenue fund to the state’s road fund. That money comes from purchases of automobile parts and other items. Capturing the transfer and keeping it in general revenue will help balance the state’s budget.

The committee bill also includes provisions to increase the beer barrel tax, which is estimated to create an additional $3 million for the state.

The revenue aspect of the bill has changed quite a bit, though, since it was first introduced to the chamber on behalf of Gov. Jim Justice. It originally included an increase to the state’s sales tax and a new tax on businesses resulting in $400 million in new revenue. In total, the committee’s changes create only $15 million in increased revenue.

Minority House Finance Chair Delegate Brent Boggs spoke in opposition to the bill.

Del. Brent Boggs, D-Braxton, Minority House Finance Chair.

“I appreciate what little revenue it raises, but that’s the problem, it raises little revenue at a time that we need substantially more,” Boggs said, “and while no bill is perfect, and I’m sure no bill ever will be; this one falls way short of what I believe many of our needs are going to be, and it’s only a fraction of what was included in the governor’s original bill.”

Vice-Chair Delegate Eric Householder of Berkeley County spoke in favor of the bill.

“Under the original concept, if we were voting on the original concept, keep in mind, we would have a higher state sales tax, we would have $400 million in new taxes; more strain on an already existing economy that we’re seeing with our businesses that are having financial problems,” Householder said, “and I think for the most part, ladies and gentleman, this is a great compromise; it’s a better bill, and for those reasons, I support it.”

The bill passed on a roll call vote of 15 to 9, and will now be considered by the full House.

Del. Eric Householder, R-Berkeley, House Finance Vice-Chair.

There was another tax-related bill that moved in the House Friday. That bill is 2933, which expands the base of the current sales tax and lowers the overall rate to generate additional tax revenues.

Republican Delegate Riley Moore, of Jefferson County, is the lead sponsor. His bill would reduce the sales tax to 5.5 percent from the current 6 percent by January 1, 2018. It also ends current exemptions in the state sales tax on things like cell phones, personal and professional services, contracting services, mobile homes, and daycare services.

According to the bill’s fiscal note, the bill would bring in $105.6 million during fiscal year 2018, largely from the telecommunications and service taxes.

Moore says his bill would require businesses and residents who aren’t currently paying taxes to start paying, which he says will make the state’s tax system fairer and more competitive, especially in border counties.

“I think this is the best way to try to be able to do that, to be able to grow our economy,” Moore noted, “and also, especially for me, I’m from Jefferson County, our sales tax is quite a bit higher than our neighboring counties in Virginia, in particular. We have a lot of our folks go shopping over there, and we’re trying to keep some of that tax money here in the state.”

Moore says he think his bill will set a good foundation for West Virginia’s economy moving forward.

Sales Tax Collections Decline Amid Fiscal Uncertainty, June Flood

Officials say West Virginia’s tax collections did not meet estimates again in July, marking 15 months since the state met or exceeded those estimates.

Secretary of Revenue Bob Kiss says West Virginia tax collections were nearly $33 million short of estimates for the month. A large portion of that was due to a decline in the state’s consumer sales tax collections.

The sales tax is often called one of the most stable forms of revenue for the state, but in July alone, collections came in more than $22 million below estimates.

Revenue officials say while June’s devastating flooding had some impact on those collections, other factors, including uncertainty at the end of the fiscal year in June about the health of the state’s overall budget, also played a role.

The last time consumer sales tax collections were this low was July 2004.

Revenue officials say they do not believe the low consumer sales tax collections will be a trend for the 2017 fiscal year and those revenues will rebound in August.

0809FloodMoneyINTVlong.mp3

An interview with Sec. Bob Kiss about the impacts June's flooding with have on the state budget.

Kroger Mistakenly Charged Charleston Tax Outside City Limits

Kroger says three of its grocery stores outside of Charleston’s city limits have been mistakenly charging customers a 1 percent city sales tax.

Kroger spokesman John Lambert said Tuesday that stores in the Kanawha County communities of St. Albans, Cross Lanes and Marmet have been adding the city sales tax to the 6 percent state sales tax on select items such as prepared foods, alcoholic beverages and health and beauty products.

Lambert says the mistake was discovered Monday. The amount collected by the error totaled $13,700.

Lambert says Cincinnati-based Kroger will donate the $13,700 to flood relief efforts in West Virginia. Customers can bring receipts showing the mistake to stores for a refund.

Charleston’s 1 percent sales tax went into effect in July 2015.

Sales Tax Hike Gaining Traction in W.Va. Senate

After calls from members of the Democratic Party, Senate leaders have decided to move forward with a tax increase that could potentially solve many budgetary problems for the 2017 fiscal year and rein in the even larger problems looming in the 2018 budget year.

Tuesday, members of the chamber’s Finance Committee began discussing a bill introduced listed on Gov. Tomblin’s special session call that has yet to be taken up– an increase to the state’s consumer sales tax.

The bill as introduced allowed for an up to one percent increase in the state’s 6 percent sales tax.

The Senate Finance Committee;s amended version, which will be taken up a second time Wednesday, would sunset the tax hike in three years, rolling back the 1 percent increase on July 1, 2019.

Until then, however, the bill would bring in $196 million during the 2017 budget year and $214 million each year after.

“I don’t think that we would have had as much interest in this initially as we do now,” Senate Finance Chair Mike Hall said after a Tuesday afternoon meeting.

“We’d had conversations with people about whether or not they’d warm up to the idea and I think given the crisis, as it looms, part of the process of legislation is people become more aware of the circumstance.”

Other attempts at increasing taxes this special session have failed, though, including a proposal to increase the state’s tax on various tobacco products. The bill died in the House of Delegates last week.

Hall admitted getting the tax increase to pass both chambers will be a heavy lift.

“I just thought it was time to begin this conversation and see how far we get with it.”

Democrats, like Senate Minority Leader Jeff Kessler, have pushed Senate leaders to come up with a more comprehensive solution to the state’s budget problem. This bill would help close the state’s budget gap in 2017, leaving about a $70 million deficit, and bring the 2018 gap down from more than $380 million to around $160 million.

Senate leaders intend to put an amended version of the Senate budget to a vote by Thursday, sending it over to the House of Delegates and inevitably into a conference committee, where members of both chambers will negotiate the final version.

Hall said Tuesday that version of the Senate’s budget will not include the increase to the state’s sales tax, but will instead rely on nearly $200 million in Rainy Day funds to find a balance.

If both chambers approve the sales tax increase, though, Hall said the conference committee can consider the 196 million in new revenues for the 2017 budget year.

That new revenue, according to the Senate Finance Chair, would keep lawmakers from raiding the Rainy Day Fund and from having to implement most major cuts to state agencies.

Senate Clears Fee Increases to Help Roads

West Virginia senators have cleared a bill aimed at fixing roads by raising the state sales tax, DMV fees and the gas tax in certain instances.

The GOP-led Senate voted 25-9 on Wednesday to send the bill to the Republican-led House, which has been more reluctant to raise taxes.

The bill would raise about $316 million annually to put into roads. A one-cent hike in the current six-cent sales tax would yield the bulk of the money at $200 million.

About $66.3 million would be raised by increasing DMV fees, from driver’s licenses to car titles. Broadening and lowering the privilege tax on car purchases would raise $17 million.

Raising the gas tax by three cents when wholesale prices are $2 or lower, among other adjustments, would yield $33 million.

Sales Tax Bill Dead in the House

Members of the House of Delegates have killed a bill that would have reduced the state’s consumer sales tax while removing exemptions for certain types of professional services.

House Bill 2704 was tabled on a 92-2 vote in the House.

On Saturday, the bill was passed out of the House Finance Committee and also pushed forward on first reading.

The committee version of the bill would have reduced the state’s sales tax to 5.5 percent beginning January 1, 2017, while closing loopholes in some services that are exempt from the tax.

It was expected to bring in an additional $70 million dollars in the first calendar year, imposing the tax on legal, accounting and engineering services, just to name a few. After that, the bill proposed continued to reduce the sales tax, aiming to reach 4.75 percent by January 1, 2020.

House Finance Committee Chairman Eric Nelson said both sides of the aisle had concerns and leadership felt it was best to table the bill.

Minority Leader Tim Miley made the motion to table the bill initially Monday afternoon, but his motion was rejected.