After six months of input from economists, academics and government officials, the Select Committee on Tax Reform on Tuesday opened the floor to 33 individuals and representatives of various groups and organizations to hear their thoughts on revamping West Virginia’s tax system.
“I’m intrigued to see where the passion is,” committee co-chairman and Senate Finance Chairman Mike Hall, R-Putnam, said of the public hearing on tax reform.
During the four hours of hearings, three major themes emerged: creating an earned income credit to provide tax relief to low-income workers; eliminating the personal property tax on business inventory; and increasing the state’s tobacco tax.
Afterward, Hall said that, given the current economic realities, the committee will probably submit a series of principles for tax reform to the full Legislature, as opposed to proposing tax reform legislation.
“Can you get there in 2016? Probably not in a substantial way, but you at least can have these ideas in place,” Hall said.
“We’ve already said there won’t be one all-encompassing bill,” co-chairman and House Finance Chairman Eric Nelson, R-Kanawha, added.
Nelson said the next step will be to turn the proposals over to John Deskins, director of the Bureau of Business and Economic Research, to conduct economic modeling for each of the scenarios.
Consensus themes that emerged Tuesday included:
n Groups representing children, families and citizens’ organizations advocated for earned income tax credits that would provide $47 million a year of state income tax relief for about 38,000 low-income workers, with an average refund of about $330.
“I’m asking you today to put West Virginia’s vulnerable families first,” said Jennifer Thacker, of the state Alliance for Sustainable Families, one of the advocates of the EITC.
n Representatives of business groups called for repeal of the state’s personal income tax on business inventory, which they call the leading deterrent to business investment in the state.
“It’s absolutely a factor in keeping businesses from locating here,” said Parween Mascari, of the West Virginia Chamber of Commerce.
However, Hall noted that property taxes are in the state Constitution, not state Code, so revisions would require voters to approve an amendment to the Constitution.
“This particular tax fix would be a statewide decision,” he said.
n Several speakers advocated increasing tobacco taxes, currently among the lowest in the nation, as a way to increase revenue and reduce health care costs in the state.
“The increase needs to be sizable, all at one time, to bring a significant decrease in tobacco use,” said Cinny Kittle, of the Coalition for a Tobacco Free West Virginia. From 2006 to 2010, smoking-related health care costs and lost productivity cost the state $1.8 billion, she said.
Hall said any chance for passage of a tobacco tax hike next session will depend on initiative from Gov. Earl Ray Tomblin.
“Unless there’s some push from downstairs, from the Governor’s Office, I don’t see it happening,” Hall said.
Speakers also differed on whether tax cuts attract new business investment to the state.
Ted Boettner, of the state Center for Budget and Policy, said West Virginia has never recovered from the $425 million a year in tax cuts enacted beginning in 2006, including eliminating the sales tax on food and the business franchise tax, and rolling back the corporate net tax rate, which he said have contributed to budget deficits each year.
“West Virginia has a significant revenue problem that can’t be addressed with tax cuts only,” he said.
However, Ben Wilterdink, of the conservative American Legislative Exchange Council (ALEC), said the best way to grow business is to move away from detrimental corporate taxes.
“Lowering taxes on business would definitely help low-income families,” he said, noting that businesses pass on tax costs in the form of higher consumer prices and in lower wages for employees.
Some speakers cited states that sharply cut corporate and income taxes and suffered severe financial ramifications, including Kansas and Wisconsin, as cautionary tales for the committee.
“The current state of state revenues, not to mention its roads, suggest we should adopt a cautious approach,” Rick Wilson, of the American Friends Service Committee, said of Kansas’ revenue woes.
A couple of speakers, including Chris Hamilton, representing the state’s Business and Industry Council, said the key is to significantly reduce the size of government.
“We certainly must reduce the size of state government in a meaningful, substantive, and long-term way,” he said, noting that will mean the loss of government jobs and services.
Also, Bill Raney, of the West Virginia Coal Association, called for a reduction in the coal severance tax from 5 percent to 2 to 3 percent, to help make prices for West Virginia coal competitive with neighboring states.
“We truly believe one of the quickest paths to economic recovery is through our industry, and the oil and gas industry,” he said. “If we can sell it, we can clearly produce it, and that will help the state.”
The committee does not have another meeting scheduled at the moment but will probably meet at least one more time before the 2016 legislative session, Nelson said.
Two speakers proposed legalizing marijuana as a way to address the state’s revenue woes, but Hall said there’s no chance the Legislature would take up the issue in 2016.
Reach Phil Kabler at firstname.lastname@example.org, 304-348-1220, or follow @PhilKabler on Twitter.