Interims: Error in Road Fund legislation will cost WV lost revenue
Nov. 14--An error in legislation increasing taxes and fees to raise about $140 million a year for the state Road Fund will cost West Virginia lost revenue, Deputy Revenue Secretary Mark Muchow told legislators Tuesday.
Intended to raise new revenue to eventually finance road bonds, the legislation passed in June increased the state gas tax, raised various Division of Motor Vehicles fees and also raised the motor privilege tax -- the sales tax on motor vehicle sales -- from 5 percent to 6 percent.
However, the bill failed to increase the sales tax on long-term vehicle leases, leaving it at 5 percent, Muchow told the Joint Committee on Government and Finance.
"I think the intent was to move it all up to 6 percent," Muchow said of the omission in the legislation. "It's a little technical thing that will cost a little bit of money from the sales tax side unless it's fixed."
Indeed, while revenue from gas taxes and DMV fees is running ahead of estimates, so far this budget year, privilege tax collections are running $11.2 million below projections.
For October, privilege tax collections of $19.63 million missed estimates by $632,893, but are up 7.1 percent over October 2016. However, the increase from 5 percent to 6 percent should have increased privilege tax collection by about 18 percent.
Also during interim meetings Tuesday:
Muchow said estimates are that the state loses between $50 million and $100 million a year in sales taxes on internet transactions where the vendor does not collect and remit the state sales tax on transactions.
Technically, residents are required to report and pay those unpaid taxes on their income tax returns, but Muchow said those payments amount to less than $100,000 a year.
He said that when the Tax Department audits businesses, auditors looks for any unpaid taxes on internet transactions, but said it's not cost-effective for the government to audit individuals over unpaid sales taxes on internet purchases.
Division of Forestry Director Barry Cook told legislators that he believes the division should stay within the Department of Commerce, rather than be transferred to the Department of Agriculture, a move being promoted by Agriculture Commissioner Kent Leonhardt.
Leonhardt contends that trees are a crop and that Forestry would be better managed under Agriculture.
However, Cook said Forestry should remain within Commerce, which oversees agencies geared to economic development, including the state Development Office and Division of Tourism.
"The fact is, Forestry is an economic driver for the state, and we should stay organized with the other economic drivers," Cook said.
Cook said he has taken steps to upgrade the division since taking over as director under Gov. Jim Justice, including hiring 12 foresters after 2016 budget cuts forced the layoffs of 37 employees, and raising revenue through increased timbering on state property.
Another concern with transferring Forestry to Agriculture, raised by Delegate Isaac Sponaugle, D-Pendleton, is that foresters have civil service protection in Commerce but would become will-and-pleasure employees under Agriculture.
Reach Phil Kabler at email@example.com, 304-348-1220 or follow @PhilKabler on Twitter.