The Senate’s Select Committee on Tax Reform heard presentations from two major fiscal research organizations on a bill that would repeal the personal income tax in West Virginia.
The bill, SB 335, would also phase out the consumer sales and service tax and the use tax to create and enact a general consumption tax law.
Tax Foundation policy analyst Jared Walczak said the “very bold approach” of eliminating the income tax would increase productivity and migration into the state, as seen in other states that have enacted similar legislation.
“West Virginia has some disadvantages,” Walczak said. “The tax code needs to be more attractive.”
Walczak said a lower or nonexistent income tax in the state would make it much easier or more enticing for businesses to locate in the state, especially since West Virginia is closely located to several major cities including Pittsburgh, Columbus and Washington, D.C.
Executive director of the West Virginia Center on Budget and Policy, Ted Boettner, said the shift of revenue dependence onto a general consumption tax would most likely harm to low- and moderate-income families, while cutting costs for high-earning families.
Boettner said some low-income earners would have to pay up to $2,700 more in taxes each year if the bill were to pass.
Unlike the Tax Foundation’s findings, Boettner said his research showed that major cuts to income tax make “little difference” in stimulating state economies.
“I would make a strong argument that there wouldn’t be economic growth,” Boettner said.
Members of the committee are looking forward to developing the bill further to explore the possibilities it could present the state, as well as address issues the state would wish to avoid.
“It’s something big for this state,” Senator Glenn Jeffries (D-Putnam) said. “It’s huge.”
Nine states currently do not have an income tax. Many other states have lowered their income tax or are considering legislation to eliminate the tax.
The committee will examine the specifics of the committee substitute for the bill at the next meeting. The fiscal note will also be analyzed if available at that time.
Once approved by the comittee, the bill will be referred to the Senate Finance Committee.
