Tomblin proposes tax increase on tobacco products, new tax on phones

CHARLESTON, W.Va. — Gov. Earl Ray Tomblin is proposing a pair of tax increases, the reworking of a current tax and the changing of another tax package in his plan to balance the current fiscal year’s budget and decrease the projected revenue hole for next fiscal year along with giving help to state workers faced with paying more for their health insurance.

Tomblin’s proposals were detailed for reporters Wednesday at the state capitol just before his final State of the State Address.

Facing a current budget year projected revenue shortfall of $354 million, the governor will ask lawmakers to increase the tax on all tobacco products beginning April 1. The tax on cigarettes would go up 45 cents a pack, taking it to $1.00 per pack. Taxes on various other tobacco products would be increased from 7 to 12 percent. Tomblin is also proposing a new tax on e-cigarettes, an item the state currently does not tax. The tax would be 7.5 cents per milliliter.

The tobacco tax package would bring in $78 million a year, according to state Revenue Secretary Bob Kiss. Making the increases effective April 1 will help this fiscal year to the tune of $18.9 million, Kiss said.

Tomblin’s plan also includes a new tax on telecommunication services. More than 40 other states already have the tax, Kiss said. It would be a six percent sales tax on customers in the areas of voice and data. The telecommunication companies would collect the tax from their customers and submit it to the state, Kiss said. The six percent could be more in Home Rule cities which have raised their sales taxes in recent months.

The new tax is estimated to generate $60 million a year and $10 million for the current budget if lawmakers agree with Tomblin and make it effective come April 1.

Two other revenue moves being proposed by the governor would impact existing taxes.

The state has been in disagreement for several years with the federal government over the state’s Medicaid Behavioral Health Care Provider Tax, which is a tax on those who provide behavioral health care services. Tomblin is proposing repealing the tax and replacing it with a new tax on durable medical equipment for those who provide Medicaid behavioral health care services. The new tax will bring in $15 million, just like the current tax, Kiss said.

Tomblin also wants authority to shift collections from the special severance tax on coal and natural gas currently used to pay down the old workers’ compensation fund debt to general revenue to balance the budget this fiscal year, if necessary, but the tax would be repealed no later than June 30 to provide a break for the struggling energy sector, Kiss said.

Although the governor doesn’t provide any pay raises for state workers in his proposed budget, he wants to lessen the impact of the $120 million cuts in state PEIA coverage for state workers by allocating $43 million from the general revenue fund and other monies to take care of about 90 percent of the increase state workers face come July 1.

Other notes on the Tomblin proposed budget:

–use $52 million out of the state’s Rainy Day fund to make up the revenue shortfall this fiscal year. Tomblin won’t propose any Rainy Day money being used in the 2017 budget.

–make permanent in future budget years the 4 percent state budget cut ordered by Tomblin earlier this budget year.

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