Repealing Income Tax May Cost State $610M, Revenue Analysis Says

By Kabler, Phil | The Charleston Gazette (Charleston, WV), March 3, 2017 | Go to article overview

Repealing Income Tax May Cost State $610M, Revenue Analysis Says


Kabler, Phil, The Charleston Gazette (Charleston, WV)


Proposed legislation to repeal West Virginia's income tax and replace it with an 8 percent sales tax would cost the state about $610 million a year in lost revenue and could cause "undesired outcomes that would harm businesses, consumers and workers in the state, according to a government analysis. According to the fiscal note prepared by Deputy Revenue Secretary Mark Muchow, while the sponsors of Senate Bill 335 presumably intend for it to spur greater economic growth over time, it could have the opposite effect.

"The provisions of this bill effectively increase taxes on business inputs by an amount that is at least double the potential income tax savings on business profits, Muchow said in the note, which was filed Thursday.

"Significantly higher business tax burdens could, in effect, produce undesired outcomes. All taxes are ultimately paid by individuals, Muchow added.

He advised that higher indirect taxes on business purchases could result in a combination of lower wages, lower employment and higher consumer prices.

"A thorough independent analysis of the economic consequences associated with massive tax changes is strongly recommended, Muchow stated.

The proposed 8 percent consumption tax would apply to many goods and services that aren't currently taxed, including groceries, nonmedical professional services, personal services, public utility bills, including electricity, water, sewer, phone and cable, and various direct-use purchases by businesses.

Once fully implemented, the consumption tax would bring in $1.33 billion to $1.39 billion more a year than the current $1.29 billion raised through the 6 percent consumer sales tax, Muchow's fiscal note projects. …

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