There are concerns about how Governor Jim Justice’s tax plan could affect businesses in West Virginia.
These concerns have emerged in speeches by state lawmakers and in analysis by tax experts who monitor changes at the state level. One analyst predicted the West Virginia tax proposal could raise corporate taxes up to $ 330 million.
Delegate Jason Barrett, R-Berkeley, spoke on the floor of the house and said he supports an income tax exit. But he was concerned that what the governor was proposing instead would be out of whack.
“Unfortunately, we are seeing many of these outrageous tax hikes in the governor’s tax plan – one aimed directly at low- and middle-income families as well as small businesses,” Barrett said during a member’s remarks meeting on Wednesday evening.
The governor is proposing a 60 percent cut in state income tax, suggesting this will be a splash that will fuel population growth. He wants to completely remove the tax within three years and rely on this growth.
Income tax makes up about $ 2.1 billion of the state’s tax base, about 43 percent of the general fund for government services such as education and healthcare.
An overview of the governor’s plan estimates the initial personal income tax cuts of $ 1,035,650,000 and discounts of $ 52 million for lower-income residents – but also tax increases of $ 902,600,000 to offset most of those breaks .
The proposal would also impose a number of other taxes, including on soft drinks, tobacco, beer and wine. And Justice suggests taxing some professional services for the first time, including law firms, accountants, gyms, and more. He also advocates a “luxury tax” on some items that cost more than $ 5,000. And he proposes a tiering of severance taxes on coal, oil and natural gas that pays more when the markets are better.
Justice refers to the extra taxes than pulling the rope.
“For this to really work, we all need to pull the rope together as West Virgins,” he said in a document distributed this week.
Barrett, who serves on the House Finance Committee, expressed concern that some local residents and small businesses are pulling the rope harder than they can really afford.
He said the soft drink tax is more accurately described as a beverage tax, citing a variety of examples: V8 Healthy Greens, flavored water, almond milk, and even Ensure, which are meal replacement shakes.
“Essentially, any beverage that is not bottled and is not cow’s milk, 100% undiluted juice, or plain water is subject to this tax,” Barrett said. “That is food. This is a food tax. No soda tax and certainly no sugary drinks tax. “
For many years, West Virginia has imposed a one cent per 16.9 fluid ounce tax on soft drinks. That adds up to about $ 15 million in favor of West Virginia University Medical School.
Starting January 1, Justice is proposing to increase the tax – expressed differently depending on how the drink is made or sold: 6 cents per 16.9 fluid ounce drink, a tax of $ 4.80 each Gallon of soft drink syrup or 6 cents for every 28.35 grams of dry mix.
The beverage industry therefore describes the proposal as an increase of 500 percent. Barrett described such a tax as more likely “in some liberal cities”.
“Our plan for the future must be a fiscally responsible, multi-year approach to phasing out income taxes,” he said, “which lowers taxes on working West Virgins, not just shifts the tax burden.” . ”
The Council on State Taxation, a not-for-profit trade association representing multistate corporations, also today expressed concern that “the proposal will ultimately shift the overall tax burden of the state from individuals to corporations.”
“The proposed increase in sales tax from 6 percent to 7.9 percent (a 32 percent increase) and the expansion of the tax base to include professional services would place a disproportionate burden on companies,” wrote Patrick Reynolds, senior tax counsel at the Council on State Taxation.
Currently, according to the organization, about 44 percent of its sales tax revenue comes from West Virginia from taxing business-to-business transactions.
“The bill would increase that percentage and increase the overall corporate tax burden,” Reynolds wrote. “The increased tax burden on corporate inputs is likely to prevent increased business activity (investment and jobs) in the state.”
Another analyst also concluded that West Virginia’s tax proposal would mean an overall boost to business.
Ryan Maness, senior policy analyst and tax advisor at MultiState, a state and local government relations firm, drew this conclusion in a post titled “West Virginia Tax Reform Wears a Historic Award for State Enterprises.”
While individuals will see a tax cut, Maness concluded, state-owned companies will be hooked for about $ 230-330 million in new taxes.
Maness also looked at the taxation of business-to-business transactions and the newly taxed professional services.
“When lawmakers in West Virginia are assessing whether this bill is the way to go for their state, they should have a clear view of all the costs and benefits,” wrote Maness.
“While individual taxpayers will see a net tax cut, tax increases in job creation could do more harm to people than a modest individual income tax cut.”
On Wednesday evening, Delegate Larry Rowe rose on the floor of the House of Representatives and said he was also concerned about the impact of the tax plan.
“Tax shift helps some and hurts others,” said Rowe, D-Kanawha, a member of the House Finance Committee.
He said the increased sales tax would hit those who can least afford it. And he suggested that western Virgins living in border districts cross the state line to avoid paying those taxes. “It’s going to destroy our economy in the cities along the borders,” Rowe said.
And Rowe said, “The tax makes every transaction a taxable event – transactions with attorneys and accountants filing your tax returns, I believe, haircuts, taxes on services that have never been taxed before. Again, large law firms and large accounting firms can easily get the work over the bridge and make money without paying 8 percent of their gross income. “