CHARLESTON, W.Va. (AP) - West Virginians would pay a higher sales tax next year, but their income tax rates would be reduced and might eventually be eliminated, under a bill approved Wednesday by the state Senate.
Under the proposal, which met a chilly reception in the state House, the state sales tax would rise from 6 percent to 7.25 percent.
The amended bill, approved 18-13 by the chamber’s Republican majority, would also end state income taxes on military pensions and Social Security benefits, similar to the tax bill recently passed by the House. It would eventually end all income taxes provided other revenues grew sufficiently in later years.
“It’s a net tax decrease after it’s fully implemented,” said Sen. Ed Gaunch, a Charleston Republican. It’s time for lawmakers to try something different to stimulate West Virginia’s economy, he said, adding that the bill would close the state’s projected budget deficit in the fiscal year that starts in July without requiring deeper funding cuts for education and social services.
A skeptical Sen. Douglas Facemire, a Braxon County Democrat, said the tax increases and decreases amount to “a net zero gain to our citizens” and put future state finances at risk.
“It’s not fiscally responsible,” he said.
It’s similar to bills the Senate previously passed with the support of Democratic Gov. Jim Justice.
However, it differs sharply in two more major ways from the House’s proposal, which would leave the sales tax at 6 percent while broadening it to cover cellphone services. House Majority Leader Daryl Cowles said later that the “huge” increase in the sales tax bothered him the most.
The House voted 85-0 on Wednesday evening against accepting the Senate amendments.
Both houses later adjourned the special budget session until June 5.
The Senate’s provisions would establish graduated coal severance taxes depending on market prices instead of the current 5 percent tax. That’s intended to help the struggling industry but expected overall to reduce tax revenue by $50 million in the coming year.
The Senate bill also would raise the corporate net income tax from 6.5 to 7 percent, something else Cowles faulted.
Senators said resolving the differences in taxes may be left to a House-Senate conference committee.
Senate Finance Committee Chairman Mike Hall, whose committee advanced the bill and who voted for it, said he was “somewhat ambivalent” about it and the risk of worse future budget deficits in the effort to stimulate the economy. He noted that Justice, who’s had success in business, says it will stimulate the economy along with the governor’s proposed highway reconstruction program that’s pending before the Legislature.
It would cut West Virginia’s lowest income tax rate from 3 percent for those earning less than $10,000 down to 2.25 percent for incomes below $20,000.
It would reduce the highest rate from 6.5 percent for incomes above $60,000 down to 6 percent for incomes above $200,000.
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