The subcommittee on Senate Bill 335, a bill that would create the 2017 Tax Reform Act, met today to discuss the proposed legislation.
Mr. Carl, a special advisor to the Select Committee on Tax Reform, spoke to the committee.
Encouraged by Senator Gaunch (R-Kanawha) to give the highlights, Mr. Carl said the six percent sales tax would be repealed and be replaced with an eight percent consumption tax. Groceries would be taxable under this bill but wouldn’t start until January 1st 2018. Construction services would only be taxable for the first $10,000. Existing exemptions that would be continued, are realtor commission, tuition, advertising, data processing, licensed daycare services, aircraft repair services, exempts charities, yard sales, textbook sales and more. Any excess money gained would go into the rainy day fund. And in the future half of the excess money would go into the rainy day fund. There are also Exemptions for all social security income from personal income tax and limit tax of military pay until the tax is phased out completely. The tax rates on the sale of beer, tobacco, and liquor would be increased along with e-cigarette products.
Senator Palumbo (D-Kanawha) said, “My concern is that this bill will shift the tax burden from higher income people to lower income people. Do we have any data that will show how this will affect them?”
Mr. Carl responded, that they didn’t have data in any formal way. However, he said regressiveness is only a concern when one is talking about putting a burden on those who can’t get their essential needs. The regressiveness of the bill will be mitigated by tax credits for lower income working class and retired folks to be sure they can get those.
Senator Plymale (D-Wayne), wanted to know what services will be taxed.
Mr. Carl said, “It would be easier to tell you which ones won’t be taxed.”
Senator Plymale said, “Coming from a border area, I have grave concerns. We have the Huntington Mall in Barboursville and we get a lot of people from Kentucky and Ohio who shop there. With this, have you looked at how these types of areas would be affected?”
Mr. Carl reassured the committee that convenience is a huge force for shoppers and if people are willing to travel all that way to shop, then they will most likely continue to do so despite the two percent increase in sales tax.
The bill was amended to change the decrease on coal severance tax from five percent to two percent from a two-year decrease to three-year increase.
Senator Palumbo stated his concern on the shift of the burden on the lower income households.
Senator Plymale said the bill is a far cry better than the introduced version. The exemptions are much better now but he shares the same concerns
Senator Blair (R-Berkeley) said he shares concerns but the bill is one of the most flexible pieces of legislation. If this passes or not, he is encouraged about the attitude of the legislators regarding the bill.
Senator Boso (R-Nicholas) said, “I recognize that there are issues that are legitimate but I am a man o faith. The legislation is still very flexible so that if we find something wrong with it down the road, we can tweak it a bit. We need to continue to look at it as it certainly isn’t perfect, but it is a step in the right direction and I encourage that we pass this on.”
The bill was referred to the Committee on Finance with the recommendation that it pass.
