CHARLESTON, W.Va. — As the state Senate starts consideration of a major tax overhaul this week, the Democrats who would be needed for passage have questions.
“We’re still mulling it over,” said Senator Ron Stollings, D-Boone.
The Republican majority in the Senate has talked for months about opening up the state Constitution to allow property taxes on manufacturers to be cut.
A two-thirds majority in both chambers of the Legislature would be necessary to get an amendment on ballots. Senate Finance Chairman Craig Blair, R-Berkeley, said he’ll try to persuade Democrats to get on board.
“I’m still building consensus. I want the minority involved,” Blair said, referring to Democrats.
This resolution expected to be introduced Monday could change West Virginia’s tax system in a variety of ways.
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Start with a a six-year phase out of the property tax on machinery, equipment and inventory, including retail inventory. Senate leaders say that’s about $100 million in total.
Doing so requires a vote of West Virginia’s citizens on an amendment because property taxes are embedded in the state Constitution.
“Nobody has been able to do the heavy lift of being able to get our constitution amended to solve this problem,” Blair said last week on MetroNews’ “Talkline.”
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In addition, the resolution could open the constitutional door to cutting the property tax on cars, trucks, trailers and other “rolling stock.” That could be another $200 million.
The potential of cutting property taxes for vehicle owners is also a way to sweeten the deal for average citizens.
“The automobiles is not a gimmick by any means. It’s a tip of the hat to working West Virginians,” Blair said.
Later in the interview he exhorted listeners, “If you want the automobile tax eliminated, call your senator.”
The other pieces of the legislation are meant to make up for lost revenue. The property taxes to be cut largely affect counties and local school systems, and Democrats have been vocal about wanting assurances that they won’t be left high and dry.
“The foundation needed to be laid. We needed to be able to find the revenues to treat it fairly – to keep us revenue neutral,” Blair said.
So the proposal calls for increasing the sales tax, currently at 6 percent, by one-half of a percent to 6.5 percent.
Blair emphasized that increase would apply not only to regular West Virginians but also to people traveling through the state, people shopping across state lines or to people who are paid under the table.
“It’s much better to have a consumption tax,” he said. “That extra half percent can catch other groups as well: tourism, people traveling through the state – and the underground economy. The only way to get them to pay their fair share is to have a consumption tax,” he said.
Moreover, the cigarette tax would rise by 80-cents per pack, to $2. Taxes on other tobacco products and vaping products would also rise.
Blair, who is a smoker, concluded, “I do not mind spending a little bit more money on my cigarettes to get rid of my tax on my automobile.”
The increased sales tax and tobacco tax hike are expected to generate an estimated $200 million.
The remaining $100 million would be made up by controlling spending, combined with additional revenue from economic growth. That’s an area where Democrats will have real questions.
“We still don’t think that really makes up the difference in lowering the other taxes,” said Stollings, who is a member of the Finance Committee.
“We’re trying to make sense of it. We’re going to mull it over the weekend.”
Stollings, who is running for governor, is also concerned about how the shift could affect taxpayers. He suggests it could be a relief for manufacturers but a greater tax rate for people buying products.
“You just worry that it’s relieving the tax on richer people and corporations and putting it back on little people,” he said.
Senator Corey Palumbo, D-Kanawha, said he wonders about how the overall shift would affect taxpayers.
“My general thought is it’s hard to shift a reduction in these business taxes totally over to the people and consumers, which is what this bill looks like it’s doing right now,” said Palumbo, a member of the Senate Finance Committee.
“I think that’s a little bit of a difficult sell for the public. If I were doing it, I’d probably do it in a little bit of a different way — not shift it all over to the public and people, but it seems like that’s what the plan is.”
He said he likes getting rid of the property tax on vehicles. But he suggested offsetting that with increased real estate taxes instead.
Palumbo said he still needs to examine the details of the proposal, though.
“It’s hard to form a complete opinion on it quite yet,” Palumbo said.