Businesses concerned about W.Va. income tax reform as lawmakers begin work

CHARLESTON, W.Va. (WSAZ) - Lawmakers started working Tuesday morning on West Virginia Gov. Jim Justice’s proposal to eliminate the state personal income tax.

The bill was introduced in both the House of Delegates and State Senate, and referred to each chamber’s finance committee for review and possible amendments before a possible vote.

The current proposal would cut the income tax by 60 percent beginning next year, with the goal to eliminate it over a period of three years, while raising some other taxes to cover the loss of revenue. That includes increasing sales tax by 1.9 percent across the board, to a new state level of 7.9 percent, in addition to eliminating exemptions for sales tax on certain goods and services.

“We are very concerned about the large increase in consumer sales taxes,” West Virginia Chamber of Commerce President Steve Roberts said. “West Virginia, under this proposal, would have the highest consumer sales taxes in the nation, and then there would be some add-ons.”

Those additions would include making people pay sales tax on computer hardware and software, legal services, accounting services, other professional services, selected advertising, electronic data processing, health and fitness memberships and litters ticket sales. The state hopes to create $180 million per year in revenue by expanding the consumer sales tax base.

These costs would either be passed to the consumer or have to be absorbed by the business, Roberts said. He is concerned this is just shifting the tax burden instead of reducing taxes. He said businesses often have a small profit margin on some items and would not be able to survive without passing the increased tax to the consumer, making their products less competitive to items purchased online or in a bordering state.

“If you jack up the tax by 500 or 600 percent on those things, we are eliminating their margin of profit,” Roberts said. “Many of them have held on through the COVID crisis just really by the skin of their teeth. They’re telling us that they can’t bear this tax increase. They can’t pass it on, they are priced as hard as they can price, they feel they can not pass it on and they can not bear a tax increase of this size and scope.”

“The solution that is on the table right now, is really going to hurt consumers, it’s really going to hurt small business,” Roberts continued. “I’ve had employers tell me that they are looking at layoffs of up to 10 percent under some of the proposals that they are seeing, and that will not help our economy. It is counterproductive to what we are trying to do.”