W.Va. tax collections down $360 million

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By Phil Kabler
The Charleston Gazette

CHARLESTON, W.Va. -- Cuts in the business franchise and corporate net income tax and the elimination of the sales tax on food have reduced state tax collections in the current budget year by about $360 million, Revenue Secretary Bob Kiss told the Senate Finance Committee on Monday.

"If none of these tax cuts had passed, the state would be seeing significantly higher revenue," said Kiss, who said the goal is that the tax cuts will generate significantly more business activity in the state.

The Tomblin administration is looking to close a $146 million revenue gap in the 2014-15 state budget, using a variety of spending cuts and transfers, as well as a proposal to take $83.83 million out of the state's Rainy Day emergency revenue funds.

Kiss said the intent is that while tax cuts will hurt in the short term, they ultimately will stimulate economic investment in the state.

He noted that in 10 years, the state has improved from 48th to 23rd in amount of business tax burden and now has a favorable business tax rate compared to all surrounding states.

"You can make the argument we have surpassed all our surrounding states in regard to tax competitiveness," he said.

Arguably, Kiss said those tax cuts have made possible some of the recent investments in the state, including the Obebrecht Corp.'s proposal to locate a cracker plant-polyethylene plant complex in Wood County.

"If these taxes were still in place, we would have more revenue," Revenue Deputy Secretary Mark Muchow added. "However, the [revenue] growth rate would be in the stagnant range."

Kiss noted when the business franchise tax and sales tax on food were imposed in 1989 to deal with a state budget crisis, "We assured everyone we would take the taxes off once we got the state turned around."

Also, to balance the budget last year, the administration emptied a $45 million account used to assure that state personal income tax refunds are paid quickly.

Because that fund remains empty, Kiss said the department will be monitoring tax refunds closely this year.

"We may be in a uniquely weird situation in terms of making refunds," he said.

Unlike before 1994, when the Income Tax Reserve Fund was established, there is not an issue with the state's ability to pay refunds, since the state currently has more than $933 million in its Rainy Day funds.

"It will not be an issue of not having resources -- we have nearly a billion dollars -- it will be an issue of accessing those resources," Kiss said.