Sales Tax Exemptions Cost State $500 Million A Year

The Charleston Gazette, June 14, 2005

Eliminating sales tax exemptions for professional and other services could increase state tax collections by more than $500 million a year, estimates presented to a legislative interim committee on Monday show. Senate Finance Chairman Walt Helmick, D-Pocahontas, provided the figures to a joint House-Senate Finance Committee interim workgroup studying tax fairness issues.

Reducing or eliminating exemptions to the sales tax — exemptions that fill 15 pages of the state code — has been an ongoing topic of legislative discussion for many years.

In 1995, then-Sen. Joe Manchin proposed reducing the sales tax from 6 percent to 3 percent by eliminating sales tax exemptions. Then-Gov. Gaston Caperton opposed the measure on the grounds it would increase West Virginians’ health-care costs.

Helmick said he has asked state Department of Tax and Revenue officials to prepare charts detailing all sources of state revenue for the committee’s next meeting.

Also Monday, former state tax commissioner and longtime tax reform advocate Michael Caryl said one of the first steps the Legislature could take toward a fairer tax system would be to raise the current exemption from paying state income taxes from the current income level of $10,000 or less to the federal poverty level.

He also recommended eliminating the personal property tax on vehicles, and eliminating all tax credits in state tax law.

Helmick agreed that past tax credits have been abused, most notably the 1985 Supertax credit that was enacted in hopes of luring a Saturn auto plant to the state. Instead, the state gave more than $100 million in credits, much of it going to coal companies to install high-tech mining equipment in their operations.

“Every time I see a Saturn car, it makes me think of all the hundreds of millions we gave away,” he said.