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West Virginia Senate Clears Half Of Two-Pronged Personal Property Tax Overhaul

Will Price
West Virginia Le
Senate President Mitch Carmichael, R-Jackson, presides over the chamber as lawmakers vote 17-16 to pass Senate Bill 837. The bill is part of a two-pronged approach to pass sweeping tax reforms.

A two-pronged tax overhaul got halfway completed Monday in the West Virginia Senate. The sweeping proposal — which includes a repeal of hundreds of millions of dollars in personal property taxes on manufacturing, motor vehicles and other personal property, as well as hikes on tobacco and sales taxes — is the combination of a bill and a proposed constitutional amendment that allows for all of the proposed changes to take effect.

A marquee agenda item of the currently Republican-led legislature in recent years — that’s been considered for more than a decade of legislative sessions — has drawn criticism for throwing into question hundreds of millions of dollars in funding for counties. 

Senators debated Monday the first half of the overhaul, Senate Bill 837, for more than two hours before voting 17-16 to approve the measure. 

Sen. Bill Hamilton, R-Upshur, and Sen. John Pitsenbarger, R-Nicholas, broke with the majority to join Democrats in opposing the measure. Sen. Kenny Mann, R-Monroe, was absent from the vote.

The measure offers sweeping reforms to the state tax code — including a six-year phase out of ad valorem taxes (those based on the assessed value of property) on manufacturing machinery, equipment and inventory; retail inventory and personal property taxes on motor vehicles. 

“Change is scary; it is. Change is scary. It's scary for everybody, even when you know sometimes that it's the right thing to do. Sometimes just the idea of change is scary,” Sen Charles Trump said on the floor in support of the bill. “And, Mr. President, if you're around this Legislature long enough, you tend to get a feel for when we have arising and percolating up one of these critical moments, one of the critical moments where we can make a choice about the future.”

Democrats, though, argued that the repeal of the manufacturing aspect of the personal property tax will put the burden on individual taxpayers. They also argued that the repeal will not create jobs in the way Republicans say it could.

“We have to get away from believing that big business tax cuts are the way to prosperity. I've heard — in support of decrease in the franchise tax or the corporate income tax, getting rid of prevailing wage act right or bringing in Right to Work — that it will create prosperity in the state, that will increase jobs, that it will bring people to West Virginia,” Sen. Richard Lindsay, D-Kanawha, said. “And that has not happened.”

In all, the loss of revenue from Senate Bill 837 would total about $300 million each year at the end of the six-year phase out (in FY 2028) — and questions remain about the long-term solvency of replacement revenue. In a Senate Finance Committee meeting last week, it was revealed that a special revenue fund could become unsustainable by 2032. 

“I applaud those in the majority that are trying to incite new business. All I'm saying is if we rush this, we run the catastrophic risks,” Sen. Paul Hardesty, D-Logan, said. “Maybe this thing should be studied and studied thoroughly, tested  and vetted thoroughly  — and then come back and take something to the voters. But to do the smoke and mirrors, dangle the carrot out there, give me this shiny object with [a cut to] a car tax to give another round of [cuts to] business taxes? It's not the answer.”

To make up for that loss in revenue, taxes on tobacco (from $1.20 a pack of cigarettes to $2.00 a pack) and other tobacco products (from 12 percent of the wholesale price to 50 percent of the wholesale price) would be increased under the bill — as would taxes on e-cigarette and vape products (from 7.5 cents per milliliter to $1.00 per milliliter). The consumer sales tax would also be hiked a half of a percent (from 6 percent to 6.5 percent) as part of the proposal. 

The highest annual revenue from those hikes would be around $200 million, according to the Senate Finance Committee, which would leave $100 million unaccounted for. The tobacco tax would also decline year-to-year, according to those projections. 

Votes cast Monday on Senate Bill 837 may foreshadow what might come when the companion proposed constitutional amendment goes up for adoption, which is slated for Tuesday.
Senate Bill 837's effectiveness is contingent on the adoption and ratification of that proposed constitutional amendment, Senate Joint Resolution 9.

“My biggest fear is that it's going to be denied to the people West Virginia by this body, by the rejection of SJR 9 — which does nothing less, Mr. President, than give the people an opportunity to see what we’ve put in front of them,” Senate Finance Chair Craig Blair, R- Berkeley, said. 

Senate Joint Resolution 9 — which needs a two-thirds majority to be sent to the House of Delegates before heading to a vote of the general public for ratification — would authorize lawmakers through general law to eliminate or lower any “species” of personal property taxes. 

Senate President Mitch Carmichael, R-Jackson, said Monday on The Legislature Today the plan was to vote on the second component of the tax overhaul Tuesday “or Wednesday, at the latest.”

Wednesday marks Day 50, known commonly as “crossover day”, of the 60 day session — the last day for legislation to be passed by its house of origin.   

As a proposed constitutional amendment, Senate Joint Resolution 9 is subject to the crossover day deadline.

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