CHARLESTON, W.Va. – The House of Delegates on Friday passed a bipartisan tax reform bill that helps stabilize the state’s budget picture while providing tax relief for seniors, veterans and low- and middle-income West Virginians.
“This is a tremendous step forward to addressing our budget crisis and providing real tax relief to our citizens,” said House Speaker Tim Armstead, R-Kanawha. “This week, Republicans and Democrats in the House reached across the aisle to craft a tax reform plan that helps address our budget shortfalls, but also provides meaningful relief to citizens who need it most. This legislation shows we are serious about providing direct tax relief to those in our state who are struggling to make ends meet.”
Many House members had serious concerns with the Governor’s original proposal, which would have increased the consumer sales and corporate net income taxes July 1, while reducing the personal income tax by 20 percent in future years.
This week, leaders from both the Democrat and Republican caucuses in the House came together to write an alternate proposal that maintains the current 6-percent sales tax rate while also changing the types of personal income tax relief covered by the plan.
“This was more than just a bipartisan vote today,” said Delegate Brent Boggs, D-Braxton, who serves as Minority Chairman of the House Finance Committee. “This proposal represents a true collaboration between Republicans and Democrats to create a piece of legislation that helps stabilize our budget situation while providing tax relief to seniors, veterans and working families across West Virginia. This will not solve our fiscal problems, but it is a reasonable first step.”
Beginning Jan. 1, all military retirement income would be exempt from personal income taxation. The bill would also increase by $500 the personal income tax exemption for those making less than $100,000 a year, raising it from $2,000 to $2,500 – the first increase in this exemption since 1987.
The bill would also phase out over a three-year period taxes on Social Security income for those with annual incomes less than $100,000, with 25-percent reductions that kick in Jan. 1, 2018 and Jan. 1, 2019, followed by complete elimination of the tax on Jan. 1, 2020. West Virginia is currently one of just 13 states that tax Social Security income.
In total, the proposal will provide nearly $100 million in annual personal income tax relief to seniors, veterans and low- and middle-income residents once it is fully implemented.
While the bill maintains the 6-percent sales tax rate, it does raise revenue by removing some of the special exemptions and loopholes that have been written into the tax code over the years, including exemptions for telecommunications, sales of electronic data services, the direct use of communications, and health and fitness club memberships. It also removes the sales tax exemption on the first $40,000 of labor for new construction.
The bill is estimated to provide an additional $100 million in revenue for the coming budget year.
“While it might not fully close our potential budget gap, this bill will go a long way to averting significant cuts to public education, the Department of Health and Human Resources and our higher education institutions, as well as avoiding dipping into our state’s Rainy Day Fund,” said House Finance Chairman Eric Nelson, R-Kanawha. “This is a responsible, bipartisan approach, and I strongly urge the Senate and Governor to give it the full consideration it deserves.”
The Governor has not yet put a budget bill on the Legislature’s special session call, so the House cannot yet begin formal work on a budget bill for the fiscal year beginning July 1. House lawmakers have voted to adjourn until Tuesday to await action on House Bill 107 by the state Senate.
“The House of Delegates stands ready to work with the Governor and our Senate colleagues on a path forward that balances our budget and averts a government shutdown,” Speaker Armstead said. “I believe the bill we passed today provides a great bipartisan framework for a solution. I encourage the Governor to add a budget bill to the special session proclamation, and I hope the action of the House this week provides a bipartisan template for how we can all work together in the coming days to design a budget that can satisfy everyone’s concerns.”