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State tax reform proposal will include tax cuts for seniors

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State tax reform proposal will include tax cuts for seniors
By Pamela Pritt, Register-Herald Reporter

State Republicans plan to cut the income tax on seniors' Social Security benefits, but don't yet know what that means for an ailing state budget.

House Majority Whip John O’Neal, R-Raleigh, announced the proposal to a group of AARP members gathered at Tamarack on Wednesday. 

“It’s about time,” O’Neal said, noting W.Va. is one of only a dozen states to tax Social Security benefits. “It’s time West Virginia did what is right by our seniors,” he continued.

In a follow-up interview, O'Neal told the Register-Herald that tax reform modeling is not complete, meaning no one has a number for what the effect will be on the state budget. 

"Our finance committee will bring numbers," O'Neal said, noting the entire legislature could then vote on the bill. "There are various procedures that will have some leveling effect. No piece of the tax reform puzzle is going to be considered by itself."

The state faces a $250 million deficit. Gov. Earl Ray Tomblin has ordered a 4 percent budget cut, continued a three-year hiring freeze and made cuts to public education – a first in decades. 

According to Deputy Secretary of Revenue Mark Muchow, a similar proposal to repeal the income tax on Social Security last year came with a fiscal note of $77 million, a number which grows each year as more state residents are eligible for benefits.

However, Muchow said not all Social Security benefits are taxed. 

"Most are already non-taxable," he said. Social Security recipients must hit a certain level of income before their benefits are taxed — $25,000 annually for a single person and $32,000 a year for a married couple, he said. Those benefits are not included in adjusted gross income, Muchow explained.  

Also, he said, seniors who qualify for Homestead Tax Exemption receive a tax credit under federal guidelines, further reducing their tax burden.

O’Neal said the Republican leadership heavily favors the move, saying it was a “priority.” He said he expects the bill to be "revenue neutral," meaning that the GOP must find money to offset its cost – either by raising other taxes or cutting expenses.

Announcing a tax cut for senior citizens in an election year might be seen as a political move, but O'Neal said that wasn't the case. 

"We (Republicans) have wanted to see tax cuts on Social Security for years," he said.