West Virginia’s conflicting visions for sales tax overhaul – Wacky Tax Wednesday

You don’t have to dive too deep into American politics to realize that we, as a people, often come up with very different solutions to the nation’s problems — and that’s when we agree on what constitutes a problem in the first place. This is not only true on Capitol Hill; it’s the current situation in West Virginia, where competing bills seek to solve a growing deficit by either increasing or reducing the sales tax rate.

Increase rate, tax more

Former Gov. Earl Ray Tomblin advocated increasing the state sales tax rate and extending it to telecommunications services. Although these changes weren’t adopted during his tenure, his legacy lives on in Senate Bill 335.

The measure proposes replacing the existing 6 percent sales tax with an 8 percent general consumption tax for the privilege of selling tangible personal property and services in West Virginia. It allows few exceptions (e.g., school textbooks, government purchases, and certain sales to churches).

Sales of food and food ingredients have been exempt from tax in West Virginia since July 2013, but SB 335 would tax them at the full rate. If approved, this would earn the state the dubious distinction of having the highest statewide tax rate on unprepared food.

Reduce rate, tax more

In stark opposition to SB 335, House Bill 2933 proposes a gradual reduction in the general consumer sales and service tax rate, from 6 percent to 5 percent. Food and food ingredients would remain exempt, but the House measure seeks to tax many more enumerated services than the Senate bill.

As with the rate reduction, change would occur in stages. For example, non-medical personal services, professional services, and telecommunications services would be taxed beginning Oct. 1, 2017; electronic data processing services, health and fitness club memberships, and music lessons would be taxed as of Jan. 1, 2018.

A third option

Gov. Jim Justice also has a plan. His first budget proposal sought to raise the sales tax rate from 6 to 6.5 percent and tax professional and advertising services. In the face of opposition, however, he has already reduced the proposed sales tax increase to 6.25 percent and kept advertising services exempt.

To offset these changes, he is now proposing a 1-cent-per-ounce tax on sugary drinks. If that reduces consumption, all the better: “Gosh knows, it would have been great if I’d drank a few cans less of sweet soda pop.”

Put 10 politicians in a room with a problem and they’ll emerge with 10 different solutions. But with hard work, open minds, and a little luck — and perhaps the added motivation of a growing deficit — they’ll come up with a compromise. It will be interesting to see what happens in West Virginia, if the sales tax rate will increase, decrease, or stay the same. Will more services and groceries be taxed? Will West Virginia become the next part of the country with a special tax on sugary drinks? Like many people in West Virginia, I suspect, I’m on the edge of my seat.

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photo credit: John Picken Harpers Ferry via photopin (license)