Today marks the 52nd day of the 60-day Regular Legislative Session. With only eight days remaining in the session, the main outstanding piece of pending legislation appears to the personal income tax repeal and the vastly different approaches proposed by the Governor, State Senate, and House of Delegates.
Governor Justice proposed $902.6 million in tax increases to pay for the personal income tax cut, including raising the consumer sales and use tax rate from 6% to 7.9%; creating a tiered severance tax for fossil fuels; a new tax on certain luxury goods; and increased taxes on cigarettes, tobacco products, e-cigarettes, beer, wine, liquor, and soda. Justice would also remove sales tax exemptions from professional services, such as legal services, accountants, computer hardware and software, and other categories.
The House passed H.B. 3300 Monday, phasing out the personal income tax by $150 million in its first full year and annually until the tax is gone. The House version includes an Income Tax Reduction Fund, which skims off tax revenue from special revenue sources and existing income streams to help accelerate the tax cuts while also encouraging decreased government spending.
The Senate Finance Committee amended H.B. 3300 to put in their own personal income tax plan which attempts to marry parts of the House and Governor’s plans. The Senate plan would reduce personal income tax rates by more than 50%, including for small businesses and sole proprietorships, but not for investment income. The plan would reduce revenue from the personal income tax by $1.09 billion.
To pay for the personal income tax cut, the Senate version of H.B. 3300 would raise the consumer sales and use tax from 6% to 8.5%. It would also remove sales tax exemptions for services commonly used by businesses and tax other services at lower rates.
Other tax increases in the Senate version include reinstating the food tax at 2.5%; taxing prepared food at 8.5%; a 4.3% tax on short-term lodging; an 8.5% tax on contingency-based legal settlements; and the creation of a new Lottery scratch-off game.
Stay tuned as this will undoubtedly be a hot topic of the final 8 days.