Slow Down: Rushing to change taxes creates problems
For most people, the word “compromise” conjures images of meeting in the middle, taking good components from two ideas and blending them into a new idea that works well for as many people as possible. It appears as though the West Virginia state senate thinks of compromise as introducing a third idea that is even more extreme than either of the first two.
Earlier this week, the state Senate Finance Committee adopted a strike-and-insert amendment to House Bill 3300 — the House of Delegates version of the personal income tax phase-out. The committee’s new version contains some elements of HB 3300, HB 2027 and Senate Bill 600, which is Gov. Jim Justice’s plan.
This version at first comes across as more moderate than Justice’s, but more radical than HB 3300. For example, it reduces the personal income tax by more than 50 percent, initially, as compared with the 60 percent in Justice’s plan.
But it retains and amplifies some of the more alarming aspects of Justice’s plan. The new Senate plan raises the consumer sales tax higher than Justice wanted, to a disturbing 8.5 percent. It retains Justice’s plan to remove several sales tax exemptions, making this transition even harder on employers. It reinstates the food tax at 2.5 percent, and 8.5 percent on prepared foods. It creates a new 4.3 percent tax on short-term lodging (tell us again about working to attract more visitors to the state …) and a new 8.5 percent tax on contingency-based legal settlements. That’s just the beginning.
By the way, the plan still leaves a $200 million gap state senators hope will be filled by “natural growth” in state tax revenue.
Far from coming across as a meet-in-the-middle compromise, many aspects of the new Senate plan are so extreme they might have been designed to make Justice’s plan look like the better option.
Meanwhile, Jared Walczak, vice president of the Tax Foundation, which reviewed the plans, said while there are aspects that “merit further consideration,” there are challenges, and that “a slower phase-in of rate reductions may be a worthy trade-off for trying to address this thing.”
In other words, pump the brakes, folks. Far more discussion must take place on the damage done by immediately implementing such extreme tax changes and increases, as compared with any advantage that might be gained in phasing out the personal income tax relatively quickly.
Time is short, but the remainder of the session must be spent on ensuring we have a plan that will be best for ALL West Virginians, not an extreme turn in the wrong direction that will end in disaster as lawmakers scramble to repeal it a few years from now.