Aug. 9, 2010
Huntington’s Home Rule Taxation Procedures Have Been Suggested Statewide, But They Were Postponed or Ignored
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – West Virginia tax studies have often recommended/suggested municipal/county sales taxes and municipal income taxes. Why? To supplement city revenue for taxation components encroached upon by the state, as well as declining state/federal grants and unfunded state/federal mandates.
Tax Modernization studies in 2006 and 2009 prepared for Gov. Joe Manchin by the WV Department of Revenue contain the suggestions as coming from earlier reports of such predecessors as the 1999 Commission on Fair Taxation. Those reports found the top WV tax issues as Corporate Net Income Tax/Business Franchise Tax, Personal Income Tax (tax rates) and Municipal Business & Occupation taxes.
HISTORICAL PERSPECTIVE
Did you know that a conflict over taxation led to the split between Virginia and West Virginia? According to summaries contained in Tax Modernization Project(s) prepared for Gov. Joe Manchin, “equal and uniform” tax rates (the lack thereof) contributed to the split from Virginia.
Virginia’s constitution allowed owners of “ever increasing valued” property in Virginia’s Tidewater Basin to pay a “fraction” of value while citizens in the West paid full value for real estate and livestock.
Early forms of the WV Constitution thus highlight “no one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value.”
The Legislature was empowered to “authorize the corporate authorities of cities, towns and villages, for corporate purposes, to collect taxes [but] this authority shall be uniform” with respect to persons and property within the jurisdiction of the authority imposing the tax. (1872 Constitution) DOWNLOAD BRIEF QUOTES FROM HISTORIC SUMMARIES IN PDF FORM HERE.
LIMITED TAXATION CHOICES
Since Huntington’s city council considers a series of tax reforms tonight, August 9, learning a little from the past helps put now and the future in focus.
Let’s avoid the euphemisms --- the proposed “occupation” tax is a variation of an “income” or “earnings” tax.
That said, various analysis of WV state and local taxation have contemplated distinctions between the needs of municipalities which have been (due to the WV system) relying less on property taxes and more on the Business and Occupation tax. As far back as a 1959 study, “personal net income taxes; raising the Consumers Sales and Service and Use Taxes to three percent; and extending the B & O to all professional income” whose salaries and wages had not been encompassed in existing tax packages.
The next year, the legislature adopted the modern form of the state Personal Income Tax.
Later, the legislature would continue to adjust the state personal income tax to account for relief of low income households. The federal household poverty line is a tool often used to gauge taxation where earnings or income is involved.
HUNTINGTON’S HOME RULE REFORM
The tax reform package under consideration by council includes the 1% occupation tax (with a $1,250 cap); a 1% city sales tax; and removal of the B & O on manufacturing and lowering it on retail/service AND removal of the user fee.
Council chambers have been packed by individuals --- mostly living outside of the city limits --- arguing about the unfairness. Actually, the Comprehensive Study found that WV’s personal income tax received the most negative responses followed by the Property Tax.
However, the largest subcategory of responses “indicated that the tax was unfair to low and middle income taxpayers or that the tax favored high income tax payers.”
DOWNLOAD TAX NEGATIVES PDF HERE
(On the positive side, state business taxes (franchise, corporate net income ) received “equitable” responses from those surveyed.) Interestingly, both a municipal income and municipal/county sales taxes have been discussed/mentioned in the state tax modernization studies. But , until the home rule pilot program, none of the local versions have not been implemented except for the so-called “user fees” , though a form of a municipal sales tax is available and that municipal B & O became discretionary , after the state itself abolished its own B & O.
Although Ohio, Kentucky, Maryland and other states have “occupation” or “earning” or “income” taxes, the residents of WV have a statistical anomaly --- the low wages of its workers. The study acknowledged that “due to below average economic capacity ... WV per capita State and local tax collections are less than 80% of the average state.”
RECOMMENDATIONS FOR LEGISLATION
The December 31, 2009 modernization acknowledged that “local governments are severely limited in their ability to raise revenue” and that the modernization workgroup recommended “further study” before introducing specific legislation.
Huntington’s municipal sales tax proposal is an option throughout the state but only if they “elect to eliminate” their municipal B & O tax. Still, the report indicated, “a municipal sales tax would also be difficult for the State Tax Department to Administer, since the municipal boarders are constantly changing and are very difficult to define.” (A county level tax is recommended.) (Editor’s Note: The recommendation contained the escrowing of insurance payout on properties destroyed but not demolished, give the same priority in tax sales to liens for municipal fees, and further study the “landbank” concept statewide.)
DOWNLOAD 2009 SUMMARY RECOMMENDATIONS PDF HERE.
UPPER and LOWER LIMITS?
West Virginia’s personal income tax system suggests that a lower exemption might be in order, but council has removed that provision from the current ordinance. The original occupation tax ordinance initiated by council contained an exemption for earnings under $10,000 and a cap at $100,000. By comparison, the poverty limit threshold for a family of four is currently $22,050.
Under Appendix B in Strengths and Weaknesses of Local Revenue Systems pertaining to local, school, municipal and county government revenue, the modernization survey contained complaints over local B & O enforcement issues as well as suggestions that municipalities should have home rule. Other responses included redundant (local) services, mishandled funds, and lack of accountability or poor administration of funds.
The full reports can be accessed here: http://www.state.wv.us/taxrev/publications/taxModernizationProjectReport.2006.pdf OR http://www.state.wv.us/taxrev/publications/taxModernizationRecommendations.pdf
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Huntington’s Home Rule Taxation Procedures Have Been Suggested Statewide, But They Were Postponed or Ignored
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – West Virginia tax studies have often recommended/suggested municipal/county sales taxes and municipal income taxes. Why? To supplement city revenue for taxation components encroached upon by the state, as well as declining state/federal grants and unfunded state/federal mandates.
Tax Modernization studies in 2006 and 2009 prepared for Gov. Joe Manchin by the WV Department of Revenue contain the suggestions as coming from earlier reports of such predecessors as the 1999 Commission on Fair Taxation. Those reports found the top WV tax issues as Corporate Net Income Tax/Business Franchise Tax, Personal Income Tax (tax rates) and Municipal Business & Occupation taxes.
HISTORICAL PERSPECTIVE
Did you know that a conflict over taxation led to the split between Virginia and West Virginia? According to summaries contained in Tax Modernization Project(s) prepared for Gov. Joe Manchin, “equal and uniform” tax rates (the lack thereof) contributed to the split from Virginia.
Virginia’s constitution allowed owners of “ever increasing valued” property in Virginia’s Tidewater Basin to pay a “fraction” of value while citizens in the West paid full value for real estate and livestock.
Early forms of the WV Constitution thus highlight “no one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value.”
The Legislature was empowered to “authorize the corporate authorities of cities, towns and villages, for corporate purposes, to collect taxes [but] this authority shall be uniform” with respect to persons and property within the jurisdiction of the authority imposing the tax. (1872 Constitution) DOWNLOAD BRIEF QUOTES FROM HISTORIC SUMMARIES IN PDF FORM HERE.
LIMITED TAXATION CHOICES
Since Huntington’s city council considers a series of tax reforms tonight, August 9, learning a little from the past helps put now and the future in focus.
Let’s avoid the euphemisms --- the proposed “occupation” tax is a variation of an “income” or “earnings” tax.
That said, various analysis of WV state and local taxation have contemplated distinctions between the needs of municipalities which have been (due to the WV system) relying less on property taxes and more on the Business and Occupation tax. As far back as a 1959 study, “personal net income taxes; raising the Consumers Sales and Service and Use Taxes to three percent; and extending the B & O to all professional income” whose salaries and wages had not been encompassed in existing tax packages.
The next year, the legislature adopted the modern form of the state Personal Income Tax.
Later, the legislature would continue to adjust the state personal income tax to account for relief of low income households. The federal household poverty line is a tool often used to gauge taxation where earnings or income is involved.
HUNTINGTON’S HOME RULE REFORM
The tax reform package under consideration by council includes the 1% occupation tax (with a $1,250 cap); a 1% city sales tax; and removal of the B & O on manufacturing and lowering it on retail/service AND removal of the user fee.
Council chambers have been packed by individuals --- mostly living outside of the city limits --- arguing about the unfairness. Actually, the Comprehensive Study found that WV’s personal income tax received the most negative responses followed by the Property Tax.
However, the largest subcategory of responses “indicated that the tax was unfair to low and middle income taxpayers or that the tax favored high income tax payers.”
DOWNLOAD TAX NEGATIVES PDF HERE
(On the positive side, state business taxes (franchise, corporate net income ) received “equitable” responses from those surveyed.) Interestingly, both a municipal income and municipal/county sales taxes have been discussed/mentioned in the state tax modernization studies. But , until the home rule pilot program, none of the local versions have not been implemented except for the so-called “user fees” , though a form of a municipal sales tax is available and that municipal B & O became discretionary , after the state itself abolished its own B & O.
Although Ohio, Kentucky, Maryland and other states have “occupation” or “earning” or “income” taxes, the residents of WV have a statistical anomaly --- the low wages of its workers. The study acknowledged that “due to below average economic capacity ... WV per capita State and local tax collections are less than 80% of the average state.”
RECOMMENDATIONS FOR LEGISLATION
The December 31, 2009 modernization acknowledged that “local governments are severely limited in their ability to raise revenue” and that the modernization workgroup recommended “further study” before introducing specific legislation.
Huntington’s municipal sales tax proposal is an option throughout the state but only if they “elect to eliminate” their municipal B & O tax. Still, the report indicated, “a municipal sales tax would also be difficult for the State Tax Department to Administer, since the municipal boarders are constantly changing and are very difficult to define.” (A county level tax is recommended.) (Editor’s Note: The recommendation contained the escrowing of insurance payout on properties destroyed but not demolished, give the same priority in tax sales to liens for municipal fees, and further study the “landbank” concept statewide.)
DOWNLOAD 2009 SUMMARY RECOMMENDATIONS PDF HERE.
UPPER and LOWER LIMITS?
West Virginia’s personal income tax system suggests that a lower exemption might be in order, but council has removed that provision from the current ordinance. The original occupation tax ordinance initiated by council contained an exemption for earnings under $10,000 and a cap at $100,000. By comparison, the poverty limit threshold for a family of four is currently $22,050.
Under Appendix B in Strengths and Weaknesses of Local Revenue Systems pertaining to local, school, municipal and county government revenue, the modernization survey contained complaints over local B & O enforcement issues as well as suggestions that municipalities should have home rule. Other responses included redundant (local) services, mishandled funds, and lack of accountability or poor administration of funds.
The full reports can be accessed here: http://www.state.wv.us/taxrev/publications/taxModernizationProjectReport.2006.pdf OR http://www.state.wv.us/taxrev/publications/taxModernizationRecommendations.pdf
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