Earl Ray Tomblin, the last governor of West Virginia, supported increasing the state sales tax by 1 percent and broadening it to telecommunications services. In his 2017 State of the State Address, new Governor Jim Justice said that he hates tax increases and that he intends to increase sales tax by a half of a penny. “There is no way around it,” he said.
Increase sales tax rate, eliminate exemptions
The latest version seeks to repeal the state’s existing 6 percent sales tax and replace it with an 8 percent general consumption tax, effective Oct. 1, 2017. It would also extend sales tax to many currently exempt services. In exchange, it would decrease the personal income tax and perhaps eventually repeal it — if the state meets certain economic markers. If the personal income tax is repealed, corporate income tax would be phased out incrementally.
If SB 335 is approved, the following would be subject to West Virginia sales tax beginning Oct. 1, 2017:
- Personal services (e.g., fitness services, haircuts and styling)
West Virginians have paid tax on food and food ingredients in the past — they became exempt on July 1, 2013. Under SB 335, groceries would be subject to the new 8 percent general consumption tax as of Jan. 1, 2018.
An earlier version of the bill sought to tax digital goods and services (e.g., ebooks, streaming services) and numerous professional services. They remain exempt in the latest version. The goal of the bill, according to bill sponsor Rep. Bob Karnes, is to be revenue neutral.
Business leaders have expressed support for eliminating the income tax as well as concerns about raising the sales tax rate. Gil White, state director of the National Federation of Independent Businesses, said that a higher sales tax rate “would have a tremendous impact on people’s buying power” and that it would “put West Virginia retailers along the border at a real competitive disadvantage.”
According to the West Virginia Center on Budget & Policy, a nonpartisan policy research organization, reducing or eliminating the state income tax and increasing and broadening sales tax “would mostly benefit the wealthy, likely fail to produce anticipated economic growth, and would destabilize our state’s revenue system.”
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