Despite concerns about lower and middle class, tax bill moves forward

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Despite concerns about lower and middle class, tax bill moves forward
By Phil Kabler, The Charleston Gazette-Mail

Legislation to substantially change West Virginia’s tax system continues to move forward in the Senate, despite concerns that it could hurt lower- and middle-class families and state retailers.

A Senate finance subcommittee on Monday advanced the Tax Reform Act (SB 335), which in its current version would significantly reduce income tax, corporate net and severance tax rates, replacing them with a broad-based 8 percent sales tax.

Sen. Corey Palumbo, D-Kanawha, applauded the tax reform advocates for their work but voiced concern with the bill Monday.

“One: We’re going to shift the tax burden from upper-income people to lower- and middle-income people,” he said. “Two: The 8 percent sales tax is going to be very difficult on retailers in the state, particularly ones in the border counties.”

Unlike the original draft of the bill, which would have eliminated personal income tax, the current version sets a flat rate of 2.5 percent for all income brackets. That was after a fiscal note showed eliminating income taxes would blow a $610 million hole in the state budget. The existing income tax has four rate tiers, from 4 percent for incomes of $10,000 to $25,000, to 6.5 percent for incomes of $60,000 or more.

Michael Caryl, a tax attorney and tax commissioner under Gov. Arch A. Moore Jr. in the 1980s, said a proposed earned-income tax credit for lower-income households, and a fixed income tax credit for retirees would “significantly mitigate” the regressive nature of the flat income tax.