Fiscal cliff projected if home exemption increases

A popular homestead exemption for 190,000 senior citizens and those who are disabled in West Virginia that allows them to avoid paying local property taxes on the first $20,000 of their assessed residential property has been on the books since a constitutional amendment was approved by voters in 1982.

Many legislators would like to see that homestead exemption increased, probably to $30,000, for the 188,683 residents who took advantage of that tax break last year. Members of the House of Delegates — many of them running for re-election in November — unanimously adopted a resolution earlier this year that proposed an increase in the exemption.

But members of the state Senate delayed the proposal so it could be one of the items studied during the current round of monthly interim committee meetings leading up to the start of the 2013 legislative session next February. And last week, Deputy Revenue Secretary Mark Muchow warned lawmakers that any further reductions in the homestead exemption could lead to higher property taxes for other West Virginia residents.

Muchow’s testimony came the same day the U. S. Census Bureau released a report that revealed West Virginia’s number of businesses with paid employees has declined for the sixth straight year. He warned legislators that “if you are interested in economic growth, then one of the last things to do would be to raise the homestead exemption.”

The Legislature had asked Muchow to study this issue for them and he reported his findings to a joint House-Senate finance subcommittee. One of his key concerns is the wide range of tax rates that are now in place at the county level. He said that a homeowner in rural Barbour County with a residence valued at $100,000 has the lowest property tax burden of $254 a year. But someone with a home of the same value in the Cabell County municipality of Barboursville will pay $685, which is the highest amount in the state.

The good news is that despite the range of local tax rates, the overall residential property tax rate in the state is 16 percent lower now than it was in 1980, according to Muchow. He said the average rate has dropped from 1.4 percent 32 years ago to 1.17 percent in 2010.

In the coming tax year, West Virginia residents eligible for the homestead exemption on real estate taxes can expect to avoid paying taxes on more than $4 billion of assessed property values, Muchow added.

And as of last Sunday, on July 1, every West Virginia resident now enjoys a tax cut from 2 percent to 1 percent on the sales tax on groceries, which is expected to save consumers $26 million a year. The tax is due to be completely eliminated on July 1, 2013 if emergency reserves continue to be sufficient to balance the state budget.

This will complete the demise of the consumer sales tax that was up to 6 percent in 2005 before former Gov. Joe Manchin began the gradual elimination of this tax that has been continued by current governor Earl Ray Tomblin. This is a far more widespread and popular tax reduction for this state.

Meanwhile, the end of the 2011-2012 fiscal year on June 30 may prove to be the last great year for a gravy train of a billion-dollar-plus revenue stream from the West Virginia Lottery. Thanks to delays in the opening of two new casinos in neighboring Ohio, this state took in more than $1.34 billion in revenue from July 1, 2011 to May 31, 2012, state Lottery Commission officials revealed last week — a robust 10 percent more than predicted.

But the opening of the Horseshoe Casino in Cleveland, Ohio, on May 14 and the anticipated opening of the Hollywood Casino in Columbus this fall are expected to draw substantial customers that now frequent the West Virginia Lottery’s operations in Kanawha County and the two Northern Panhandle operations at the Mountaineer Racetrack in Chester and the Wheeling Island Casino in Wheeling.

Fortunately the Hollywood Casino in Charles Town — close to the twin metro areas of Baltimore and Washington D.C. — continues to do more business each month than the state’s other casinos combined. But it probably won’t be long until the adjoining states of Maryland and Virginia come up with competing casinos as well.

Thankfully, limited video lottery revenues are 7.6 percent higher than estimated and traditional lottery ticket sales are also 9.4 percent ahead of forecasts. Other lottery products such as Powerball continue to exceed expectations but a 7 percent increase in this game only yields $2.3 million in sales so the four racetrack casinos are the major source of money.

Finally, clearly West Virginia can, and should, change its requirements for potential presidential candidates to get on this state’s election ballot. It’s single requirement of a $2,500 filing fee to be on the presidential ballot in the primary election was a national embarrassment last month. It could be replaced by a minimum number of signatures on a nominating petition, and include a smaller filing fee as well.

Why shouldn’t anyone who wants to run for the highest office in the land be required to at least get 1,000 signatures in addition to paying a more modest filing fee — not $2,500 — to be placed on this state’s primary election ballot? There are 38 states that have a presidential primary as part of their election every four years. There are three different procedures — a filing fee, a specific minimum number of signatures on petitions or a minimum level of media coverage that indicates a serious candidacy. Each of the latter two seems far superior to the first.

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