May 19, 2010
Myriad of Tweaks Introduced to Occupation Tax Proposal
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – Huntington City Council’s finance committee heard a collaboration of their proposals inserted into a newly envisioned occupation tax that would be countered with small business and occupation tax reductions.
Finance Chairman Steve Williams, along with City Attorney, Scott McClure, explained the newest effort to find a consensus.
Along the way, Williams added suggestions gathered from constituents, including a proposal from Steel of West Virginia that the “maximum cap” be in the $40,000 to $50,000 range. In addition, the new proposal removes the exemption for income under $10,000.
“For anyone making less than $15,600, it would be a reduction [from] the current user fee,” Williams said, adding that despite lowered incomes the individuals “still use city services.”
Council input favored caps of $1,000 ($100,000) to 2,000 ($200,000). Finance Director Deron Runyon prepared breakdowns for the $1,000 , $500 and $400 caps. The $400 cap would generate $600,000 less than presently collected by the user fee, so that suggestion fell out of consideration.
Since enactment of an occupation tax requires total removal of the city user/service fee ($3 weekly; $156 yearly), the projected occupation tax with a $1,000 ( one percent of $100,000 earned) would bring in about $900,000 in new revenue. (Estimated: $5.4 million occupation tax minus $4.5 million eliminated user fee= $900,000.) The $500 cap would with user fee elimination bring about $300,000 extra to the city. Williams determined that the $500 cap would essentially maintain the “status quo” on city fiscal matters.
Attorney McClure had redefined the so-called “where work done” section. The new proposal would eliminate those who “occasionally enter the city” for instructions, accounting or reporting. The tax would be based on “how much time [is spent working] in the corporate limits.”
Employees who for instance assemble in Huntington then fan out to other locations would not pay; by contrast, truck drivers such as Fed Ex and UPS that deliver within the city would pay the tax. For “unusual cases” , a determination based on an affidavit would be made by the Finance Department. The draft did not indicate if there would be an appeal procedure.
Previously, the “honor” system of collection had been interpreted as too lenient, leaving the perception of numerous individuals and businesses not paying their fair share. The new proposal would require that the Finance Department annually audit 5% of employers to ensure they are in compliance.
Runyon said that approximately 2,000 employers pay the user fee.
Williams added that mathematically works out to a minimum of 100 audited annually. “We need to collect what is owed,” he said.
Under the new draft, deferred compensation (i.e. retirement) plans would not be subject to the occupation tax.
Finally, the proposal would tax “K-1” income, otherwise known as partners in business income. “Everyone earning income in Huntington should pay,” Williams said.
The K-1 status relates to individual who are partners in a business, rather than an employee. Williams acknowledged that they “have a risk by creating the enterprise.” Runyon indicated the idea would be to tax “actively earned income” that is not normally withheld at the employer level. “They would have to self file with the city.”
Complementing the tax reform package would be three adjustment in business and occupation taxes paid by certain businesses. First, the tax would be eliminated on manufacturing (hoping to stimulate growth of new plants in the city), which represents about $120,000 annually. Secondly, those falling in the “retail” category would see their B & O drop from 0.5% to 0.4 %. Finally, service establishments would have their B & O reduced from one percent to 0.75 per cent.
The long range plan, however, is to eliminate the B & O taxes completely from ALL business as they are based on total revenue, not profits.
Since constituents had brought up user/service fee increases, projections of adding a twenty-five cent per week (to $3.25) would bring $375,000, which would be just a little more than necessary to remove the mandated city employee furloughs ($330,000).
None of these proposals incorporate projections from loss of revenue to business from individuals choosing to buy elsewhere in retaliation for imposition of the occupation tax.
Councilman and business man Nate Randolph surmised, “I don’t know if this is what we need to do. We have to (however) do a better job spreading the [tax] burdens out. If we do nothing, we gain nothing.”
Randolph countered the argument the those working in the city yet living outside the city do not utilize city services: “They are here 50% of their life. Every time they clock in to work, they utilize our services.”
Council woman Rebecca Thacker said she had received a call that one “major business would re-locate” to avoid the occupation tax. “I’m not ready to vote yes without further study.”
Councilman Russ Houck agreed: “I could not support this without further study.”
At that time, discussion turned to the one percent sales tax. (See previous article)
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Myriad of Tweaks Introduced to Occupation Tax Proposal
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – Huntington City Council’s finance committee heard a collaboration of their proposals inserted into a newly envisioned occupation tax that would be countered with small business and occupation tax reductions.
Finance Chairman Steve Williams, along with City Attorney, Scott McClure, explained the newest effort to find a consensus.
Along the way, Williams added suggestions gathered from constituents, including a proposal from Steel of West Virginia that the “maximum cap” be in the $40,000 to $50,000 range. In addition, the new proposal removes the exemption for income under $10,000.
“For anyone making less than $15,600, it would be a reduction [from] the current user fee,” Williams said, adding that despite lowered incomes the individuals “still use city services.”
Council input favored caps of $1,000 ($100,000) to 2,000 ($200,000). Finance Director Deron Runyon prepared breakdowns for the $1,000 , $500 and $400 caps. The $400 cap would generate $600,000 less than presently collected by the user fee, so that suggestion fell out of consideration.
Since enactment of an occupation tax requires total removal of the city user/service fee ($3 weekly; $156 yearly), the projected occupation tax with a $1,000 ( one percent of $100,000 earned) would bring in about $900,000 in new revenue. (Estimated: $5.4 million occupation tax minus $4.5 million eliminated user fee= $900,000.) The $500 cap would with user fee elimination bring about $300,000 extra to the city. Williams determined that the $500 cap would essentially maintain the “status quo” on city fiscal matters.
Attorney McClure had redefined the so-called “where work done” section. The new proposal would eliminate those who “occasionally enter the city” for instructions, accounting or reporting. The tax would be based on “how much time [is spent working] in the corporate limits.”
Employees who for instance assemble in Huntington then fan out to other locations would not pay; by contrast, truck drivers such as Fed Ex and UPS that deliver within the city would pay the tax. For “unusual cases” , a determination based on an affidavit would be made by the Finance Department. The draft did not indicate if there would be an appeal procedure.
Previously, the “honor” system of collection had been interpreted as too lenient, leaving the perception of numerous individuals and businesses not paying their fair share. The new proposal would require that the Finance Department annually audit 5% of employers to ensure they are in compliance.
Runyon said that approximately 2,000 employers pay the user fee.
Williams added that mathematically works out to a minimum of 100 audited annually. “We need to collect what is owed,” he said.
Under the new draft, deferred compensation (i.e. retirement) plans would not be subject to the occupation tax.
Finally, the proposal would tax “K-1” income, otherwise known as partners in business income. “Everyone earning income in Huntington should pay,” Williams said.
The K-1 status relates to individual who are partners in a business, rather than an employee. Williams acknowledged that they “have a risk by creating the enterprise.” Runyon indicated the idea would be to tax “actively earned income” that is not normally withheld at the employer level. “They would have to self file with the city.”
Complementing the tax reform package would be three adjustment in business and occupation taxes paid by certain businesses. First, the tax would be eliminated on manufacturing (hoping to stimulate growth of new plants in the city), which represents about $120,000 annually. Secondly, those falling in the “retail” category would see their B & O drop from 0.5% to 0.4 %. Finally, service establishments would have their B & O reduced from one percent to 0.75 per cent.
The long range plan, however, is to eliminate the B & O taxes completely from ALL business as they are based on total revenue, not profits.
Since constituents had brought up user/service fee increases, projections of adding a twenty-five cent per week (to $3.25) would bring $375,000, which would be just a little more than necessary to remove the mandated city employee furloughs ($330,000).
None of these proposals incorporate projections from loss of revenue to business from individuals choosing to buy elsewhere in retaliation for imposition of the occupation tax.
Councilman and business man Nate Randolph surmised, “I don’t know if this is what we need to do. We have to (however) do a better job spreading the [tax] burdens out. If we do nothing, we gain nothing.”
Randolph countered the argument the those working in the city yet living outside the city do not utilize city services: “They are here 50% of their life. Every time they clock in to work, they utilize our services.”
Council woman Rebecca Thacker said she had received a call that one “major business would re-locate” to avoid the occupation tax. “I’m not ready to vote yes without further study.”
Councilman Russ Houck agreed: “I could not support this without further study.”
At that time, discussion turned to the one percent sales tax. (See previous article)
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