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Crisis averted, but it leaves us wondering

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Crisis averted, but it leaves us wondering
Thankfully, a tax bill that would have threatened small business gets sidelined

Register-Herald editorial

We know the West Virginia Legislature is facing a monumental task of balancing a state budget that is some $353 million out of whack. And that’s just for the current fiscal year. Next year’s calculations project a yawning $460 million gorge.

So, yes, legislators are looking for more than nickels and dimes between the cushions. They need big dollars. We get that. But the last thing lawmakers need to do is pass a tax plan that would deliver a haymaker to small businesses around the state.

Thank goodness, cooler heads seem to have prevailed in Charleston on Monday.

Over the weekend the House Finance Committee added changes to House Bill 2704 — otherwise known as “West Virginia Consumer Sales and Service Use Tax.” The measure would trim the state sales tax by one-half percentage point, from 6.0 percent to 5.5 percent. On the face of it, that sounds pretty good, right? Only a hard-hearted wretch wouldn’t love a tax break for all.

It’s a charade.

If this bill becomes law — currently, it has been tabled, a veritable death sentence in legislative parlance — professional services would no longer be exempt from the sales tax. That would have hiked business expenses. What happens when business expenses go up? Those costs are passed along. The tax would have created an estimated $100 million to $340 million a year – out of the collective wallet of the consumer.

This bill, as amended, is a hammer. You are the nail.

We all would be paying more in myriad ways — including trips to the barbershop, hair salon, tax accountant and lawyer’s office. Also targeted in the Saturday morning shooting gallery were professional engineering fees, contractors’ fees for capital improvements on property and memberships at health clubs and fitness organizations — 16 additional categories in all.

If you run a small business, add in janitorial services and the cost of an advertisement on radio, television or newspaper. Yes, we at The Register-Herald have a vested interest in this. But so do you. The more an advertisement costs, the less a business advertises; the less a business advertises, the less traffic they get; the less traffic, the fewer dollars to pay employees. It would have hastened the downward economic spiral in our state. And no state — not one in the entire United States — has a tax on advertising. Not one.

With the blessing of a bipartisan vote out of committee, the amended bill had made its way onto the House floor for debate on Monday. So, yes, it was gaining momentum. And then it was stopped.

Thankfully.

Had that Finance Committee done its due diligence instead of grasping at straws, its members certainly would have run into the example of Florida in the 1980s.

That state passed a similar measure and it was a disaster for businesses and consumers — so much so that the law was repealed six months after it was signed into law.

While West Virginia burns, our legislators are fiddling around. Here we are, at the tail end of this “business friendly” legislative session, and lawmakers don’t appear to have a solid plan on how to fix the budget crisis – for this year or next. That is inexcusable. Instead of wasting time on so many bills related to a conservative social agenda, legislators should have been zeroed in on budget matters beginning to end.

For a bill to be amended in this matter without careful calculations of how it would play out in the real economy is troubling — to say the least. If this is what our legislators call progress, we would encourage them to stop meeting on weekends.