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Could Fast-Moving Tax-Cut Proposal Blow WV Budget?

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Wednesday, February 27, 2019   

CHARLESTON, W.Va. - Critics of a proposal rushing through the House of Delegates say it could blow a hole in West Virginia's state budget by using one-time money to pay for permanent tax cuts that mostly help those who are well off.

House Bill 3137 would create a fund where new money, including out-of-state online sales taxes, would go. Then, each time that fund reached a certain level, it would trigger compounding cuts in state income taxes.

Ted Boettner, executive director of the West Virginia Center on Budget and Policy, said some lawmakers may not realize they could end up using one-time money to offset tax cuts that continue for years and build on top of each other.

"This bill was pushed out of the Finance Committee without a fiscal note, without any understanding of what its impact would be on tax revenues or the state budget," he said. "It's a poorly designed tax cut that will not only lead to large revenue losses but also further exacerbate income inequality in West Virginia."

Supporters have said now that the state can collect the online sales taxes, it can afford to cut income taxes. However, Boettner said progressive income taxes hit the rich harder, while sales taxes take a larger portion of lower-income families.

Since the cuts as outlined in the bill build over time, Boettner said, they eventually could dent the state budget by from $200 million to as much as $1 billion a year. He said the new revenue might offset one year's tax cut, "but since the tax holes continue year to year, the proposal would eventually lead to large compounding revenue losses and budget holes that would likely require more cuts to schools, colleges and other budget priorities, or tax increases likely to fall on working families."

HB 3137 originated in the House Finance Committee a week ago. It did not go through a second committee, but could reach final passage in the House today.

More information from the center is online at wvpolicy.org, and the text of HB 3137 is at wvlegislature.gov.


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