WEST virginia legislature

2016 regular session

Introduced

Senate Joint Resolution 8

By Senators Karnes

[Introduced March 16, 2017; Referred
to the Select Committee on Tax Reform; and then to the Committee on the Judiciary]

Proposing an amendment to the Constitution of the State of West Virginia, amending article X thereof by adding thereto a new section, designated section thirteen, relating to fair and simple tax reform; repealing sections of article X; repealing the personal property tax; limitations on the personal income tax; authorizing new classes of real property taxes; creating a state infrastructure and equalization fund; providing for block grants to local schools and governments for education and infrastructure; establishing exemptions to the real property tax; limiting the excise tax, sales and use tax, corporate net income tax and other taxes; redirecting bond revenue; limiting reinstatement of taxes; grandfathering tax benefits earned prior to the ratification of this amendment; establishing a supremacy clause; providing for general law implementation; numbering and designating such proposed amendment; and providing a summarized statement of the purpose of such proposed amendment.

Resolved by the Legislature of West Virginia, two thirds of the members elected to each house agreeing thereto:

That the question of ratification or rejection of an amendment to the Constitution of the State of West Virginia be submitted to the voters of the state at the next general election to be held in the year 2018, which proposed amendment is that article X thereof be amended by adding thereto a new section, designated section thirteen, to read as follows:

ARTICLE X.  TAXATION AND FINANCE.

§1. [Repealed]

§1a. [Repealed]

§1b. [Repealed]

§1c. [Repealed]

§9. [Repealed]

§13. Fair and simple tax reform (FASTR).

Subsection A- Personal Property Tax Repeal

The personal property tax on motor vehicles is hereby abolished. The personal property tax on all other taxable personal property shall be assessed at the value on the date this amendment is ratified by the voters of this state for the purpose of taxation. All personal property tax exemptions in effect on the date this amendment is ratified by the voters of this state shall remain in effect until the personal property tax is eliminated. All new personal property purchased after the ratification of this amendment by the voters of this state, except for the tangible personal property of public service companies, assessed by the board of public works, shall not be subject to personal property tax. The personal property tax, except for that imposed on the tangible personal property of public services companies, shall be reduced by ten percent annually for ten years until it is eliminated. Thereafter, the personal property tax is prohibited, except the tax on the tangible personal property of public service companies which shall continue to be imposed under assessments made by the board of public works. Notwithstanding any provision of this constitution, or of any statute to the contrary, for purposes of this section, the term “personal property” shall have the meaning of that term as established in the common law of property.

Subsection B- Personal Income Tax

The legislature is authorized to levy an annual tax on all West Virginia resident individuals’  income and on the West Virginia source income of non-resident individuals. The authorized personal income tax shall be limited to a single rate not to exceed three percent. The legislature may provide for a personal deduction to be used to reduce the taxable income of taxpayers. If established, each taxpayer shall be entitled to one personal deduction for themselves and one for each bona fide dependent. No dependent shall be claimed by more than one taxpayer. A personal income tax existing at the time of this amendment’s ratification may continue for a period of not more than ten years following ratification.

Subsection C—Real Property Tax

A three class system for real property shall be established and shall replace all other forms of real property taxation authorized by this constitution. The real property taxes shall be based on fair market value. Notwithstanding any provision of this constitution, or of any statute to the contrary, for purposes of this section, the term “real property” shall have the meaning of that term as established in the common law of property.

 Class A shall consist of real property used primarily for agricultural and forestry purposes. Class A property shall be taxed based on economic output. Class A property shall not be taxed more than fifty cents per one hundred dollars of valuation.

Class B shall consist of residential real property, including rental property used exclusively for residential purposes. Class B property shall be taxed not more than one dollar and fifty cents per one hundred dollars of valuation.  

Class C shall consist of all other forms of real property including but not limited to commercial office buildings and the land on which they are situate. Class C property shall be taxed not more than one dollar and seventy-five cents per one hundred dollars valuation.  

For Class A, B and C the ratio of the tax rates levied by a particular taxing authority in any particular county shall bear the same ratio among them as the foregoing maximum rates of taxation for the three said classes of property bear to each other.  For Class B and Class C property a system shall be established to determine fair market valuation. The system shall consider current sales and market data for each county or municipality wherein the property is located. Increases or decreases in real property tax rates occurring as a result of this amendment shall be phased in over a period not less than ten years.

For each Class of property, taxing authority shall be allocated as follows; counties fifteen percentage, municipalities ten percent, local school districts sixty-five percent and the State Equalization and Infrastructure Fund ten percent. The allocation for municipalities shall not be levied for property located outside of municipalities. No taxing authority is required to levy their full allocation; Provided, however, that in the case of each taxing authority, no more than eighty percent of its allocation shall, without a vote of the people in accordance with provisions for excess levies which the legislature shall provide by general law for submitting the question to the voters of each taxing authority, be employed to levy taxes, and no taxation, in excess of a taxing authority’s eighty percent allocation, shall be effective unless at least sixty percent of the qualified voters shall approve the  exercise of some or all of the taxing authority’s remaining twenty percent of its allocation, and such increase shall not continue for a longer period than three years at any one time, and shall never exceed that remaining twenty percent of the taxing authority’s allocation;  No taxing authority shall be entitled to utilize the allocation of a different taxing authority. Local school districts shall retain all proceeds from their utilized allocation and may expend the proceeds for any educational purpose consistent with general law.

During the ten year transition period, the funds contained in the Equalization and Infrastructure Fund shall be appropriated by the legislature and divided among the taxing authorities on a pro-rata basis according to revenue shortages directly resulting from the reduction in and abolishment of the personal property tax for which increases in real property tax revenues do not cover the deficiency.

After the ten year transition period, the Equalization and Infrastructure Fund shall provide per pupil funding block grants to local school districts and funding to local governments to maintain any and all nonhighway publicly owned infrastructure. The legislature shall not be obligated to expend the entirety of the fund in any year or period of years. If the balance of the fund exceeds ten percent of general revenue, the excess may be used for any purpose as the legislature may direct.

Subsection D- Real Property Exemptions

Senior and Disabled Exemption- A “Senior and Disabled Exemption” shall be established by the legislature. The exemption shall exempt from taxation an amount of not less than thirty thousand dollars of the fair market valuation of real property, used exclusively for residential purposes, by at least one of its owners, who is a bona fide resident of this state and who has  either attained the age of sixty-five years or is permanently and totally disabled, or both.  

Homestead Exemption- A “Homestead Exemption” may be established by the legislature by general law. If established, the exemption shall exempt from taxation the real property, used exclusively for residential purposes, by at least one of  its owners, who is a bona fide resident of this state, and who has not attained the age of sixty-five years old and is not permanently and totally disabled. The amount of this exemption, if established by the Legislature, shall not exceed fifty percent of the “Senior and Disabled Exemption.”

The “Senior and Disabled Exemption,” and the“Homestead Exemption,” if any shall be phased in over a period of not less than five years.

Subsection E—Excise tax

Excise tax rates may not exceed sales tax rates: Provided, that any excise tax, existing at the time this amendment is ratified by the voters, shall continue, until repealed by the legislature,  at a rate no higher than that at which it was imposed at the time this amendment was ratified by the voters. A three-fifths majority vote of both houses of the legislature is required to impose any new excise tax.

Subsection F—Sales and Use Tax

The legislature may enact a sales and use tax not to exceed eight percent. Counties may levy a sales and use tax not to exceed one percent. Municipalities may levy a sales and use tax not to exceed one percent. Existing municipal sales and use taxes shall not require approval of the voters. The products and services subject to sales and use tax shall be determined by the legislature and shall be consistent throughout the state.  

Prior to levying a sales and use tax, counties and municipalities shall place before the voters the question of levying a sales and use tax. A three-fifths vote of the voters shall be required   for counties and municipalities to levy a sales tax. Such measures shall only be placed on general or primary election ballots and shall clearly indicate the maximum rate authorized by the levy.

Subsection G- Corporation Net Income Tax

The corporation net income tax will continue until repealed in general law by the legislature. If the corporation net income tax is ever reinstated through the process established in subsection J the tax shall not exceed three percent.

Subsection H— Other Taxes

Any state tax levied at the time this amendment is ratified, which is not specifically authorized or prohibited by this amendment, may continue to be levied for a period of not more than ten years following ratification of this amendment.  Any municipal tax levied at the time this amendment is ratified, may continue for a period of not more than ten years following ratification of this amendment.

Subsection I—Bonds

Any bonds for which personal property revenues are obligated shall have the obligation redirected toward real property revenues.

Subsection J- Reinstatement of Taxes

A three-fifths majority vote of each house of the legislature is required to reinstate any repealed tax. Any reinstated tax shall not exceed the maximum rate provided for in this article.  No reinstated tax shall continue for a period of two years.

Subsection K- Grandfather Clause for Earned Tax Relief Benefits; Enactment of New Benefits.

The economic benefit of all authorized tax credits, deductions, discounts and other tax relief benefits, earned prior to the ratification of this amendment by the voters of this state, shall be preserved and applied in a manner to be determined by the legislature; Provided, that, any new credits and other similar tax relief provisions may only be enacted by a three-fifths majority vote of each house of the legislature.

Subsection L- Supremacy

            In the event of any inconsistency between any of the provisions of this section and other provisions of this Constitution, the provisions of this section shall prevail.

Subsection M- General Law

The legislature by general law shall enact the provisions contained in this section and any other provisions required to carry out the provisions of this section.

Resolved further, That in accordance with the provisions of article eleven, chapter three of the Code of West Virginia, 1931, as amended, such amendment is hereby numbered “Amendment No. 1” and designated as the “Fair and Simple Tax Reform or FASTR amendment” and the purpose of the proposed amendment is summarized as follows: “To reform the taxation system of the state and set constitutional limits and requirements for different categories of taxes.“

NOTE: The purpose of this resolution is to enact a Fair and Simple Tax Reform or FASTR amendment to the constitution.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.