- Associated Press - Friday, February 3, 2017

CHARLESTON, W.Va. (AP) - Looking to dig out from under a deficit and escape from boom-bust cycles in state revenue, lawmakers will consider overhauling West Virginia’s tax structure this year, according to the state Senate’s leader.

Changes could include a shift from an income tax to a consumption tax, Senate President Mitch Carmichael said.

Carmichael has appointed a special committee to examine possible revisions. Its report expected in about two weeks, he said.

The proposed tax overhaul would help the state avoid the steep rises and drops in revenue it has experienced with fossil fuels as primary industries. State revenues vary with market-based swings and coal and natural gas severance taxes and employment, affecting income taxes, Carmichael said. He noted that some other states already have eliminated personal income taxes.

“It’s a fundamental change in the way we tax our citizens in West Virginia,” he said. “We would eliminate the tax on the production of income and shift it to a consumption tax, more of a consumer sales tax. And we’re examining that option.”

West Virginia’s graduated income tax ranges from 3 percent to 6.5 percent. The statewide sales tax rate is 6 percent. Some cities charge up to 1 percent more.

Addressing journalists Friday, Carmichael also said he agrees with House Speaker Tim Armstead that government cuts are needed to help address a projected $500 million budget deficit in the fiscal year that starts in July. Like Armstead, he said all state agencies and programs should be considered.

“We can’t stay away from cutting the things that have been sacred cows in the past,” Carmichael said. The general revenue budget is about $4 billion, with roughly half funding public school education, he said.

Both leaders of the Republican-controlled Legislature and Democratic Gov. Jim Justice have all said they don’t want to saddle West Virginians with higher taxes.

However, the leaders of both houses said this week they’ll consider ending various sales tax exemptions, which apply to services by lawyers and accountants, medical services and new construction by contractors, among others.

“The review process should start from the perspective of there’s nothing exempted,” Carmichael said. “Then you start adding exemptions that make economic sense from the competitive standpoint.”

The Legislature convenes Wednesday for its two-month session, with Justice giving his state of the state address. The new governor will also be unveiling his first proposed state budget.

Carmichael said he supports Justice’s proposal for a large program to rebuild roads, bridges and other infrastructure and will try to help him find a financing mechanism.

Another approach to be considered, both lawmakers said, is privatizing some state services that can be done by and may even be competing with the private sector.

One related possibility under consideration is to reduce state control of West Virginia University. That could result in lowering its $100 million in annual state support while reducing state regulations it must follow concerning personnel and reporting.

“There’s a lot of savings to be had in what we might call the freedom agenda,” said Joyce McConnell, WVU provost and vice president for academic affairs. “There are functions that we have to take part in state government that we have to pay a significant amount of money for.”

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