July 13, 2010
Huntington Occupation Tax Spurs Recall and Moving Away Threats to City Council
Reform Package Moves Forward
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – A proposed tax reform package has survived first reading mostly intact.
As the ordinances stand, workers (wage earners and self employed) could face a 1% occupation tax (without any cap) as early as Oct. 1, 2010. A 1% tax on sales within the city limits would take effect about six months after the state puts machinery in motion; however, it must contain the same exemptions as the WV state sales tax for instance, not on the purchase of an automobile or on professional services.
In addition, if the first two ordinances pass, the city would remove the Business and Occupation tax on gross manufacturing sales and drop the B & O on retail and service businesses to 0.5 per cent.
Although the first reading of an ordinance by council rules excludes public comment, the public provided plenty of fervent opposition to the occupation tax through their comments upon proposed amendments upon which they were allowed to comment.
First, Mayor Kim Wolfe commended council for having “tackled the pension” challenge and stated, “I concur with the tax reform.” (Editor’s Note: This was the UNAMENDED version of the package which included the $100,000 cap on the occupation tax.) Applauding council’s work, Wolfe said they had a vision for bettering Huntington which he balanced by stating that the city must “live within its means.”
Councilman Scott Caserta then began the lengthy procedural efforts by council to tweak the occupation tax ordinance.
REMOVAL OF CAP
“I’m not speaking one way or the other,” on the tax reform package. “But you should tax everyone equally across the board. The more money you make, the more money you have to pay,” Caserta stated.
“Whatever you make, no cap,” Councilman Jim Ritter quickly added. This started the momentum that would peel the $100,000 (i.e. $1,000) “cap” on the maximum payable per year.
Finance Chairman Steve Williams opposed the amendment as “poor policy.” He argued that individuals with high salaries have “the ability to structure where their income is earned.” Explaining that some businesses could set up their businesses so income is earned outside the city limits, not downtown, Williams sought to advance an upper “level of certainty” factor for luring new business to Huntington.
The $100,000 cap removal passed by a 7-3 vote (Williams, Nate Randolph and Mark Bates voted to keep the cap). Later, under the same premise, Williams proposed a $200,000 cap, which was also voted down by a 5-4 margin (Ms. Jackson, Mr. Williams, Mr. Bates and Mr. Randolph voted FOR the $200,000 cap. Ms. Thacker had been excused; Mr. Insco was out of town).
But Williams arguments for an upper cap actually reflect the opposition essence of those with lesser incomes now argue --- an occupation tax without a cap will drive employers who could provide higher paying jobs (such as in the $75,000 to over $100,000 bracket) out of the city.
The same argument comes from the mouths of those making middle class incomes --- they threaten, as did one employee of a hospital, to vote with their feet by moving outside the city and that the occupation tax would make the City of Huntington too expensive in which to work or live.
REFUND 25% TO CITY RESIDENTS
Vote wise, vice chairman Mark Bates came closest to hitting a favorable consensus from council members. He proposed that city residents apply for a 25% refund of their occupation taxes, which would be given only if the resident was current on their other city fees and taxes.
Having previously heard statements from council member Nate Randolph that city residents subsidize county resident services (like Sheriff’s Department protection) by a seven to one margin, Caserta initially expressed approval, “City residents already pay a municipal service fee…this levels the playing field.”
Randolph “in light of other amendments” called it “relief for city residents,” who pay a municipal service fee and a “disproportionate amount of Cabell County property taxes.”
AFSCME Local 598 president, Jim Porter, told council, “I’m afraid you are going to jeopardize your whole tax structure with this amendment. It would give the public the impression that people from out of town are paying more than people in town. You need to balance this [by lowering] the municipal fee which charges $125 for every shack. That moves the city away from those fees and toward an income tax. Better if fees repealed and income tax stays same for everyone.”
Tom McCallister, added, “You’ve beaten this thing [the occupation tax] to death [like the dog ordinance]. You are shooting yourself in the foot.”
Councilman Caserta agreed. “I hate to admit it, Mr. Porter and Mr. McCallister are correct.”
The reversal by Caserta and the absence of chairman Insco resulted in a 5-5 tie on the 25% refund of occupation taxes to city residents. (Voting no were Ms. Jackson, Ms. Loudermilk, Ms. Thacker, Ms. Clements, and Mr. Caserta.)
In addition, Caserta pointed out a discrepancy in the reason for enactment of the occupation tax. Those favoring reform have stated this is not a "money grab" or a tax to "raise revenue." But, in the ordinance, Caserta read: "This ordinance is for the purpose of raising revenue..."
Steve Williams started to explain then stepped back inferring he would clarify at another time since the meeting was already at or past 10 p.m.
TOO EXPENSIVE TO WORK HERE
Earlier, McCallister, a former member of council, had previously warned that anyone voting for the occupation tax will “probably be recalled from office.”
Graphic artist, John O’Connor told council Huntington is an island. “If you make it too expensive to work here, you’ll tax business out of town.”
Porter then agreed with O’Connor asking, “Who pays the highest portion of taxes?” The middle class, Porter answered.
LOCATION OF EARNINGS
Frances Jackson twice expressed concern on the location(s) where an employee works would determine their eligibility for the occupation tax.
“I don’t agree [because] virtually every supervisor tells them where to go.” Using a Comcast Cable (which operates both inside and outside the city limits) repair person/installer, for illustrative purposes, she argued that the choices of the supervisor would “pit workers against one another.”
However, city attorney Scott McClure advised that case law jurisprudence on “occupation taxes” indicates that “working in the city” is the nexus that constitutionally permits the tax.
DIFFERENT LEVELS REAL ESTATE, PROPERTY TAXES
Asked after the meeting by HNN if different percentages for city residents and non-residents would also be a constitutional issue, McClure disagreed citing already constitutionally litigated W.Va. property and real estate taxes.
“They are at different levels. I think the biggest part of our jurisprudence holds there’s a reasonable basis and it is in fact equitable,” McClure said. However, he did agree that “other cities and municipalities make an exception for either one (i.e. residents or nonresidents).”
The public will have their chance to comment before council on the package at the July 26 meeting. However, the council chairman could opt for a “special meeting” on the issue prior to that date.
As originally proposed (with the cap) if approved, the occupation tax would take effect October 1, 2010 and the sales tax approximately April 1, 2011. Imposition of this tax requires a 180 day notice with the state tax department.
The occupation tax would bring $7-$9 million dollars to the city’s coffers. The sales tax is estimated to generate $3.7 million. The reduced taxes on business would see a reduction of about $3.775 million in revenue.
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Huntington Occupation Tax Spurs Recall and Moving Away Threats to City Council
Reform Package Moves Forward
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – A proposed tax reform package has survived first reading mostly intact.
As the ordinances stand, workers (wage earners and self employed) could face a 1% occupation tax (without any cap) as early as Oct. 1, 2010. A 1% tax on sales within the city limits would take effect about six months after the state puts machinery in motion; however, it must contain the same exemptions as the WV state sales tax for instance, not on the purchase of an automobile or on professional services.
In addition, if the first two ordinances pass, the city would remove the Business and Occupation tax on gross manufacturing sales and drop the B & O on retail and service businesses to 0.5 per cent.
Although the first reading of an ordinance by council rules excludes public comment, the public provided plenty of fervent opposition to the occupation tax through their comments upon proposed amendments upon which they were allowed to comment.
First, Mayor Kim Wolfe commended council for having “tackled the pension” challenge and stated, “I concur with the tax reform.” (Editor’s Note: This was the UNAMENDED version of the package which included the $100,000 cap on the occupation tax.) Applauding council’s work, Wolfe said they had a vision for bettering Huntington which he balanced by stating that the city must “live within its means.”
Councilman Scott Caserta then began the lengthy procedural efforts by council to tweak the occupation tax ordinance.
REMOVAL OF CAP
“I’m not speaking one way or the other,” on the tax reform package. “But you should tax everyone equally across the board. The more money you make, the more money you have to pay,” Caserta stated.
“Whatever you make, no cap,” Councilman Jim Ritter quickly added. This started the momentum that would peel the $100,000 (i.e. $1,000) “cap” on the maximum payable per year.
Finance Chairman Steve Williams opposed the amendment as “poor policy.” He argued that individuals with high salaries have “the ability to structure where their income is earned.” Explaining that some businesses could set up their businesses so income is earned outside the city limits, not downtown, Williams sought to advance an upper “level of certainty” factor for luring new business to Huntington.
The $100,000 cap removal passed by a 7-3 vote (Williams, Nate Randolph and Mark Bates voted to keep the cap). Later, under the same premise, Williams proposed a $200,000 cap, which was also voted down by a 5-4 margin (Ms. Jackson, Mr. Williams, Mr. Bates and Mr. Randolph voted FOR the $200,000 cap. Ms. Thacker had been excused; Mr. Insco was out of town).
But Williams arguments for an upper cap actually reflect the opposition essence of those with lesser incomes now argue --- an occupation tax without a cap will drive employers who could provide higher paying jobs (such as in the $75,000 to over $100,000 bracket) out of the city.
The same argument comes from the mouths of those making middle class incomes --- they threaten, as did one employee of a hospital, to vote with their feet by moving outside the city and that the occupation tax would make the City of Huntington too expensive in which to work or live.
REFUND 25% TO CITY RESIDENTS
Vote wise, vice chairman Mark Bates came closest to hitting a favorable consensus from council members. He proposed that city residents apply for a 25% refund of their occupation taxes, which would be given only if the resident was current on their other city fees and taxes.
Having previously heard statements from council member Nate Randolph that city residents subsidize county resident services (like Sheriff’s Department protection) by a seven to one margin, Caserta initially expressed approval, “City residents already pay a municipal service fee…this levels the playing field.”
Randolph “in light of other amendments” called it “relief for city residents,” who pay a municipal service fee and a “disproportionate amount of Cabell County property taxes.”
AFSCME Local 598 president, Jim Porter, told council, “I’m afraid you are going to jeopardize your whole tax structure with this amendment. It would give the public the impression that people from out of town are paying more than people in town. You need to balance this [by lowering] the municipal fee which charges $125 for every shack. That moves the city away from those fees and toward an income tax. Better if fees repealed and income tax stays same for everyone.”
Tom McCallister, added, “You’ve beaten this thing [the occupation tax] to death [like the dog ordinance]. You are shooting yourself in the foot.”
Councilman Caserta agreed. “I hate to admit it, Mr. Porter and Mr. McCallister are correct.”
The reversal by Caserta and the absence of chairman Insco resulted in a 5-5 tie on the 25% refund of occupation taxes to city residents. (Voting no were Ms. Jackson, Ms. Loudermilk, Ms. Thacker, Ms. Clements, and Mr. Caserta.)
In addition, Caserta pointed out a discrepancy in the reason for enactment of the occupation tax. Those favoring reform have stated this is not a "money grab" or a tax to "raise revenue." But, in the ordinance, Caserta read: "This ordinance is for the purpose of raising revenue..."
Steve Williams started to explain then stepped back inferring he would clarify at another time since the meeting was already at or past 10 p.m.
TOO EXPENSIVE TO WORK HERE
Earlier, McCallister, a former member of council, had previously warned that anyone voting for the occupation tax will “probably be recalled from office.”
Graphic artist, John O’Connor told council Huntington is an island. “If you make it too expensive to work here, you’ll tax business out of town.”
Porter then agreed with O’Connor asking, “Who pays the highest portion of taxes?” The middle class, Porter answered.
LOCATION OF EARNINGS
Frances Jackson twice expressed concern on the location(s) where an employee works would determine their eligibility for the occupation tax.
“I don’t agree [because] virtually every supervisor tells them where to go.” Using a Comcast Cable (which operates both inside and outside the city limits) repair person/installer, for illustrative purposes, she argued that the choices of the supervisor would “pit workers against one another.”
However, city attorney Scott McClure advised that case law jurisprudence on “occupation taxes” indicates that “working in the city” is the nexus that constitutionally permits the tax.
DIFFERENT LEVELS REAL ESTATE, PROPERTY TAXES
Asked after the meeting by HNN if different percentages for city residents and non-residents would also be a constitutional issue, McClure disagreed citing already constitutionally litigated W.Va. property and real estate taxes.
“They are at different levels. I think the biggest part of our jurisprudence holds there’s a reasonable basis and it is in fact equitable,” McClure said. However, he did agree that “other cities and municipalities make an exception for either one (i.e. residents or nonresidents).”
The public will have their chance to comment before council on the package at the July 26 meeting. However, the council chairman could opt for a “special meeting” on the issue prior to that date.
As originally proposed (with the cap) if approved, the occupation tax would take effect October 1, 2010 and the sales tax approximately April 1, 2011. Imposition of this tax requires a 180 day notice with the state tax department.
The occupation tax would bring $7-$9 million dollars to the city’s coffers. The sales tax is estimated to generate $3.7 million. The reduced taxes on business would see a reduction of about $3.775 million in revenue.
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