The West Virginia Business and Industry Council is raising concerns that Governor Jim Justice’s grand plan would rise to the top of the wrong classification.
“West Virginia will have the highest state tax on consumer sales in the country, at 7.9%,” wrote the broad business organization in a memo stating its concerns.
Justice argued responded by arguing that this is not the proper interpretation.
“It’s not true,” said Justice.
The governor instead assessed what West Virginia’s sales tax would be when interpreted differently.
Justice said people shouldn’t only look at the state number. Instead, the governor said people should look at the combined state and local sales tax rates.
According to this interpretation, he said, Mississippi is considering a rate that would be higher than West Virginia’s combined rate. Others – including Tennessee, Louisiana, Arkansas, Alabama, Washington “and so on” – would have higher combined state and local rates, he said.
Well, the basic claim – that raising the state sales tax from 6.0% to 7.9% would be the highest in the country – is true.
The California sales tax rate is 7.25. Several states are in 7.0.
But the governor’s view is also correct.
If you look at the combined state and local sales tax rate, West Virginia’s proposed rate would not be the highest in the country. But it would be right there.
The five states with the highest combined average state and local sales tax rates are Tennessee with 9.55%, Louisiana with 9.52%, Arkansas with 9.51%, Washington with 9.23% and Alabama with 9.22 %.
The combined state and local rate of West Virginia is now considered to be 6.5%. That’s because the average local rate is 0.5. That half percent comes from the average of cities that apply 1% and cities that do not have additional sales tax.
The governor’s proposal would increase that number by 1.9 percent. Therefore, West Virginia’s new combined rate would be 8.4%.
“Eleven states have this rate or more,” said Jared Walczak, vice president for state projects at the State Tax Policy Center at the Tax Foundation.
He said the governor’s point of comparison is the right one to be considered.
“Most states have state and local sales taxes and, in some states, the local rate may rival that of the state. The appropriate point of comparison is the combined state and local average sales tax rate in each state, ”said Walczak.
Fair point, said Kelly Allen, executive director of the West Virginia Center on Budget & Policy.
But West Virginia residents would experience a significant increase anyway.
“I think it is fair for him to suggest that people should consider the combined rate of state and local sales taxes, although it is difficult to dispute that his proposal would give us the highest state sales tax in the country. This is just a fact, ” Allen said.
Even looking at combined state and local taxes, West Virginia’s proposed rate is out of step with the region, she said.
“That would put us significantly higher than any of our neighboring states, which puts companies near the border at a competitive disadvantage and is bad for Virginians who don’t have the ability to travel outside the state to take advantage of lower taxes. on sales, so the change in taxes falls more heavily on them and reinforces the regressiveness of the plan, ”said Allen.
“There is also a bill introduced this year that would allow counties to levy a 1% sales tax that, if enacted in conjunction with this proposal, could push some places towards a combined 9.9% sales tax rate. “
Speaking recently on MetroNews’ “Talkline”, Senate President Craig Blair said his first reaction to the governor’s plan was favorable. He believes that the cut in the income tax will stimulate growth and suggested that the compensation would be reasonable.
“The consumption tax will be the future in this country for all states,” said Blair, R-Berkeley.
He suggested that an increase in sales tax may not be noticed by people visiting or traveling through West Virginia.
“When was the last time you looked at the bottom of your receipt to see how much you were paying for sales tax?” Asked Blair. “Now, too, do this when you travel.”
He said: “If you could do this with a consumption tax, the people who come here to ski, mountain bike, climb, enjoy our state – they would really help to pay for it and that the sales tax increase would not will prevent them from coming to West Virginia. “
.@CraigPBlair talk to @HoppyKercheval about the governor’s income tax plan. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/XodJ1DZU6m
– MetroNews (@WVMetroNews) March 5, 2021
West Virginia residents who judge the proposal should consider the sales tax rate compared to neighboring states, said Ryan Maness, senior tax analyst at MultiState Associates, a state and local government relations firm.
“In reality, big changes require big payoffs and moving West Virginia from an intermediary package sales tax state (the Tax Foundation ranks you all 31st) to having the highest state sales tax rate in the country would be an important factor in changing ”Said Maness.
“The governor of justice has repeatedly shied away from questions about competition at the border, but a state tax of 7.9% would make you almost a point higher than any other neighboring state. This, coupled with the fact that business inputs (which are mainly professional services), will make it significantly more expensive to do business in West Virginia. “
Maness suggested that this could affect difficult political realities.
“Politically speaking, when other states have seen a significant expansion of the sales tax base in the past, lawmakers have come across an opposition buzz,” he said.
“In 2019-20, Utah spent months trying to devise and sell a plan to expand the sales tax, but it proved to be so toxic politically that lawmakers ended up revoking their own bill just weeks after passing it and the oldest member the state legislature, which was one of the main defenders of the effort, lost its next primary. The same is true for practically all states that have already carried out this process ”.
The most notable opposition in West Virginia to date has been from the business community.
In its polite but firm memo to lawmakers, the Council on Business and Industry concluded that the tax plan could encourage state residents to cross the border to make purchases, harming existing state-owned companies.
“We all agree that the elimination of personal income tax is a laudable goal, but BIC members believe that it is necessary to study, debate and contribute to the public to develop a comprehensive tax restructuring plan,” said the organization in the memorandum signed by President Mike Clowser.