CHARLESTON — A day after the West Virginia House of Delegates passed its version of a bill to phase out personal income taxes in the state, the Senate Finance Committee on Tuesday introduced an amendment to House Bill 3300 to make it a tax cut on steroids. The amendment cuts $1.09 billion in income taxes initially, and then phases out the entire $2.1 billion annual revenue source in as little as four years.
The Senate plan offsets the income tax cuts with $932 million a year in other tax hikes, including raising the state sales tax from 6% to 8.5%; reimposing the sales tax on food; and legalizing and taxing recreational marijuana — contingent on federal decriminalization of cannabis.
“When I was reading this bill, I was surprised, frankly. The majority of it is about cannabis,” Senate Minority Leader Stephen Baldwin, D-Greenbrier, said of the Senate strike-and-insert amendment.
The proposal also eliminates several exemptions to sales taxes, including many for professional services. It increases cigarette taxes by $1 a pack and imposes a state hotel-motel tax of 4.3%.
Sen. Bill Ihlenfeld, D-Ohio, noted that the higher sales tax, current local hotel-motel taxes of up to 6%, and an additional 1% sales tax in home-rule cities could increase the cost of a hotel stay by as much as 19.8%. He wondered if the state hospitality industry had been consulted on the plan.
The Senate proposal outpaces Gov. Jim Justice’s income tax cut plan, which calls for an initial $1.07 billion cut to be partially offset with more than $900 million a year in other tax hikes.
Unlike the governor’s plan, the Senate proposal does not increase beer, wine or liquor taxes, does not have a tiered severance tax system and does not tax luxury items.
A breakdown of the proposal:
Under the House version of the bill, the income tax would be phased out in annual multiples of $150 million a year, with a $75 million reduction in the first year, since the legislation would take effect midway through the tax year. It does not increase other taxes to offset revenue losses.
On Tuesday, a fiscal note on the House version of HB 3300 from the Department of Revenue raised questions about whether the legislation is constitutional, since it defers to the state tax commissioner a number of powers, including authority to set new personal income tax rates each year.
“This raises Constitutional concerns and may be an unconstitutional delegation of legislative powers,” the fiscal note, written by Deputy Revenue Secretary Mark Muchow, states.
According to the fiscal note, the House version of the tax plan would cut state revenue by $75 million in the 2021-22 budget year, $245 million in 2022-23, $303 million in 2023-24, $502 million in 2024-25, $872 million in 2025-26, and “by increasing amounts in subsequent fiscal years.”
Also Tuesday, competing resolutions for constitutional amendments to give the Legislature authority to set some or all personal property tax rates advanced in the House and Senate (HJR3, SJR7) and will be on passage stage Wednesday, March 31.
If either resolution is adopted by the Legislature, which requires a two-thirds vote of both houses, a resolution would be placed on the November 2022 general election ballot to revise the Tax Limitation Amendment of 1932.
Adopted at the height of the Great Depression in an attempt to help residents avoid foreclosure on their homes and farms, the amendment set low levy rates for real and personal property, and locked them into the constitution, beyond the purview of legislation.
If ratified by voters, the Senate resolution would allow the Legislature to set tax rates for all classes of personal property. The House resolution initially applied only to business inventory and equipment. It was amended in the House on Tuesday to also apply to personal property taxes on vehicles.
Personal property taxes on business inventory and equipment has long been a target of the state business community.
At a House Judiciary virtual public hearing Monday, three business officials spoke in favor of the resolution, while eight speakers opposed it.
That included county officials concerned that their counties would suffer from legislatively imposed tax cuts. Property taxes primarily fund county school systems, along with county and municipal governments.
A fiscal note for the Senate resolution concluded that there’s no way to know how much revenue will be lost if the amendment is ratified until future legislatures set new tax rates.
Eliminating the business inventory and equipment tax entirely would reduce tax collection by more than $400 million.
Also Tuesday, the Senate advanced to passage stage a bill to exempt sales of small arms and ammunition from sales taxes (HB 2499). The was after rejecting an amendment by Baldwin to extend the sales tax exemption to apply to purchases of gun safes and other gun safety devices.
Baldwin said his proposal would increase what is expected to be a $1.5 million tax break by $50,000 a year.
“Fifty thousand dollars for gun safety devices that will save lives,” Baldwin said. “Fifty thousand dollars to keep a child from finding a weapon.”
The amendment was rejected on an 18-16 vote.
HUNTINGTON — As COVID-19 restrictions are lifted throughout West Virginia, the Fairfield East Community Center has big plans for its future, including an Easter Egg Bash this week to celebrate its reopening.
Dustina Sizemore, community leader at the center, said it reopened a couple weeks ago and they’re trying to get it off the ground after a tough year.
The focus of the center is to get teenagers and kids involved in activities to keep them busy and off the streets. After a year of virtual schooling, Sizemore thinks they will benefit from the interactions.
“That’s hard on them. Even with school, you can’t do too much. There are so many rules and regulations you have to go by in order to have it opened,” she said.
“I know it’s for everyone’s safety, but it makes it really hard on these kids.”
The center is open from 2:30 to 6:30 p.m. daily, and Sizemore has hopes to open longer during the summer if funding is available to do so.
Activities include a gym, computer room, outdoor playground and more, but Sizemore said because the leadership is new to the community, they don’t have many connections to get the word out.
Sizemore said she and her daughter have put together an Easter Egg Bash during Friday’s hours to help reignite and celebrate the program. The free event will feature pizza, games and other activities, like coloring eggs, to celebrate the holiday.
“It’s not just about coming and playing basketball,” she said. “We want them to come and have a good time here.”
Sizemore hopes the event will be outside, where people won’t be required to wear a mask, but weather might prevent that.
The building is also available to rent outside its hours of operation. Sizemore said a variety of people rent space in the building, ranging from groups and business meetings to parties. It has a kitchen, which makes it a great place to rent, she said.
Sizemore works through the center’s agent, Recovery Point, which took over management of the building due to issues with funding in 2017.
“I really love my job because you’re giving back to these kids,” she said. “This might be the only safe environment they have. It might be their getaway place.”
Sizemore said they have been trying to update and clean the center, but COVID-19 put a damper on fundraising to do so. The playground has seen benefits from those updates and United Way is going to help with beautification projects outside, she said, but more needs done.
“We are trying to reach out to the community to get funding to get stuff that we need. I have written a lot of letters,” she said. “But it’s really about the community coming together, because we all want the best for the kids. Even if they’re not ours biologically, that’s what we want, and the best way to do that is keep them off the street.”
Sizemore can be reached at the center at 304-962-2224 or via email at firstname.lastname@example.org.
CHARLESTON — The West Virginia House of Delegates voted Tuesday to establish an intermediate court of appeals in the Mountain State, something it had failed to do during the past five years.
By a margin of 56-44, the House adopted Senate Bill 275, which would establish a court that would hear appeals in certain cases from county circuit and family courts, as well as certain administrative appeals from the state.
In 2020, the intermediate courts bill died in a vote of 56-44.
The House measure differs from the bill the Senate passed Feb. 22, so senators will have to decide if they agree with the changes made to the bill.
The bill is expected to be reported to the Senate on Wednesday morning, March 31.
Among those changes is shrinking the court from two districts to one, meaning there will be three judges under the House’s proposal. The Senate had proposed a total of six judges.
Supporters of the bill say it will create predictability and clarity in the law that will attract large, out-of-state businesses to invest in West Virginia. It also would alleviate issues with the workflow of the West Virginia judicial system, they say.
They also say it would guarantee a right to appeal in every case, even if the state Supreme Court changes its current practice of issuing rulings and opinions in every appeal that comes before it.
House Speaker Roger Hanshaw, R-Clay, left the podium to speak about intermediate courts from the House floor.
Hanshaw supported this version of the bill, saying the bulk of the state’s judiciary isn’t the Supreme Court and that the bill would help disperse the caseloads of county-level judges.
“But realize that the bulk of the work, the day-to-day function of our judiciary is done by the lower tribunals. It’s done by the family court judges. It’s done by the magistrates. It’s done by the trial court judges in the circuit courts of West Virginia,” Hanshaw said. “I’d like to see those courts be able to actually focus more on actual disputes brought by West Virginians.”
Those who spoke against the bill said the court was meant to benefit corporations and would hurt West Virginians and the state’s small businesses.
They said the Supreme Court’s caseload isn’t cumbersome, and an intermediate court would do little to address other problems in the state, including issues with roads and broadband access, hunger and the opioid epidemic.
Del. Nathan Brown, D-Mingo, is an attorney by trade, and he said an out-of-state pharmacy corporation recently told him that his clients who were plaintiffs in an age discrimination case should settle their case before the intermediate court is established.
None of his constituents had asked him to establish an intermediate court, Brown said.
“You never hear the talk of the need for an intermediate court,” Brown said. “What you hear routinely is the talk about roads or broadband or a drug-free workforce. If you want to move the state forward, you should focus on those three things, not on a court that’s not needed.”
Lawmakers have heard differing estimations as to the cost of the court.
On March 4, House Judiciary Committee General Counsel Joey Spano said the court was estimated to cost $5.7 million a year to operate.
On Tuesday, House Judiciary Chairman Moore Capito, R-Kanawha, said the House had heard the “$5 million number,” but said the court would cost $3.6 million during its first year and $2 million each year thereafter.
Del. Chad Lovejoy, D-Cabell, said the bill should not be proposed because the court was one West Virginia did not need and could not afford, no matter the dollar amount on it.
Lovejoy opposed the bill in 2020 for similar reasons. This year, he said the state’s budget was an outward reflection of lawmakers’ inner priorities.
“What we choose to spend our money on tells the people what we think is important,” Lovejoy said. “This money we’re spending here for a court we do not need is not going to help our seniors. It’s not going to help our veterans. It’s not going to help our foster children that we’ve done so much to help over the last couple years. It’s not fixing a road. It’s not going to help food insecurity or hunger.”
Under the version of SB 275 passed by the House, West Virginia’s intermediate court of appeals would have one panel of three judges. Each judge would serve 10-year terms and be paid $142,500 annually.
Gov. Jim Justice would appoint the first judges to serve starting in July 2022, when the first cases would be heard. Elections for subsequent judges would be staggered in 2024, 2026 and 2028.
Filing an appeal with the court would cost $200, and the filing fee and other fees collected by the court would go to the Ryan Brown Addiction Prevention and Recovery Fund.
The bill would allow the West Virginia Supreme Court to “pluck” cases pending in the intermediate court, especially if those cases are time sensitive.
The intermediate court would consider appeals that now go to the Supreme Court, the Workers’ Compensation Review Board or the West Virginia Insurance Commission’s Office of Judges.
The Office of Judges would be terminated, and the Workers’ Compensation Review Board would be expanded under the bill.
Dels. Pat McGeehan, R-Hancock, and Joey Garcia, D-Marion, spoke against the bill.
McGeehan voted against the bill, saying he was concerned about the elimination of the Office of Judges, saying the state’s existing Workers’ Compensation recovery process was “very important to the livelihoods of the average guys and gals in this state.”
Seven types of cases could be appealed, but not automatically, to the intermediate court:
Cases that would be automatically appealed to the Supreme Court, and bypass the intermediate court altogether, include criminal, juvenile, child abuse and neglect, and mental hygiene, as well as certified questions of law from circuit and federal courts.
After the intermediate court has issued a ruling in a given case, that case could then be appealed to the West Virginia Supreme Court.
Del. Tony Paynter, R-Wyoming, a self-employed trucker by trade, said the bill would hurt small businesses and independent workers by allowing insurance companies and big corporations to bury people in lawsuits and appeals.
“Are we here to help West Virginia’s people, or are we here to serve big businesses that may not locate here or the few that are here?” Paynter asked. “We gotta take care of the people who are here, and this does nothing close to that.”
Del. Trenton Barnhart, R-Pleasants, said supporting the bill was a “no-brainer” because it was only going to help West Virginia.
“I tell you right now, when businesses are looking at locating places, they look at a lot of things,” Barnhart said. “They really want a state with predictability, and they want certainty. That’s not just in the marketplace. That’s in the judiciary, too. They want to know their investment will be protected and that they will get a fair hearing and a full, meaningful right to appeal.”
During a public hearing about SB 275 on March 4, representatives from the West Virginia Manufacturer’s Association, the West Virginia Chamber of Commerce and Americans For Prosperity-West Virginia spoke in favor of the bill.
Representatives from the West Virginia Coalition Against Domestic Violence, West Virginians for Clean Elections and the West Virginia Chapter of the ACLU also spoke against the bill.
On Tuesday, Jonathan Mani, executive director of the West Virginia Association for Justice, called the bill an unnecessary expiation of state government.
“Today, the West Virginia Legislature abandoned core conservative values of shrinking government and fiscal responsibility,” Mani said. “Rather than spending our limited resources combating the opiate epidemic and helping abandoned and abused children, the Legislature allocated millions of dollars to create another layer of government and provide six-figure salaries for judges. Our state lawmakers put the wants of billion-dollar corporate special interests and their lobbyists ahead of the needs of West Virginia and the people who live here.”
The 2021 West Virginia legislative session ends April 10.