W.Va. food tax will drop July 1

Mannix Porterfield

If you plan on stocking up at the market Sunday, prepare to spend a little less than normal — exactly 1 percent.

Sunday not only ushers in the new fiscal year but an extra 1 percent reduction in the food tax as well, dropping it from the original 6 percent to 4 percent.

What’s more, a year from now, when fiscal year 2008 kicks in, the grocery tax takes another 1 percent dive, meaning it will have been chopped in half since Gov. Joe Manchin took office.

Lawmakers in special session agreed to the incremental slashing of the tax in special session last year.

Tax Commissioner Virgil Helton said the administration recognized that food merchants needed to readjust for the change in the tax scale.

“We wanted to give business concerns ample time to adjust their cash registers and their software to be able to immediately begin lowering the sales tax on July 1,” Helton said Monday.

In rounded-off figures, Helton explained, each 1 percent reduction in the sales tax on food translates into a loss of $25 million in state revenue.

This means the second rollback, starting Sunday, will take another $25 million in revenues from the state’s coffers and put into the hands of consumers over a year. Coupled with the initial 1 percent cut, the latest rollback means an overall $50 million tax relief package.

Even so, Helton suggested the state is on solid footing and can afford to provide the tax break.

“We’ve been blessed with strong surpluses,” he said. “We’ve been blessed with the revenues in other categories being up.”

Manchin not only has trimmed the food tax but also has spearheaded cuts in the corporate net income and business franchise taxes. In addition, relief was given to some wage earners at the lower income levels.

“The threshold used to be $10,000 if you were to pay taxes,” Helton noted. “Now, for the tax year beginning in January, that actually is tied to the federal guideline for poverty. So, depending on the size of you family and whether you’re single or married, that figure could be substantially higher with regard to the income tax.”

Even with the potential loss of $75 million annually — once the food tax falls to 3 percent in fiscal 2008 — the state might find itself staying even.

“If, over a period of time, your grocery bill is reduced and you decide you want to spend the savings on a new pair of shoes, or going to a movie, the sales taxes could come back,” Helton observed.

“This doesn’t count restaurant food or prepared food,” Helton said of the food tax reduction. “It’s basically what you consider groceries.”

The first tax reduction measure had trimmed soft drinks and vending machine sales from 6 percent to 5 percent, but that follow-up bill restored those to the original level.

“This is basically a healthy food issue,” he said.

Helton said a leading goal of Manchin upon assuming office was to relieve the tax burden to individuals and the business community alike.

“If you look at our Tax Modernization Program, he did implement a number of our suggestions,” the commissioner said. “In our report to the governor, we recommended a number of issues that needed to be studied, and we’ll continue to study those issues.”

While trimming the sales tax, Helton pointed out Manchin, in less than three years on the job, simultaneously has whittled West Virginia’s unfunded liabilities in pensions by $1 billion.

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mannix@register-herald.com