A bill to exempt Social Security income from state personal income tax will likely take effect next tax filing season – in the 2019 tax year.
House Bill 2001, sponsored by Del. Jason Harshbarger, R-Ritchie, passed during the legislative session, which ended March 9, and was sent to the governor for his signature. The governor has yet to sign it but had expressed support for eliminating the tax during his State of the State address.
Harshbarger said West Virginia is losing people to other states because of the tax structure, although he had not met anyone who had left over this specific tax, and noted that most states don’t tax Social Security. He said most of his constituents are older and that he’d received positive feedback on the legislation.
“Right now in the state of West Virginia, you’re taxed on your Social Security income so you’re basically taxed on the money when you make it, when you’re working,” he said. “And then once you retire, or get to the age to draw Social Security, you’re taxed again ... .”
The bill states that it “shall apply to taxable years beginning after December 31, 2018.”
The original bill, which is supported by the AARP West Virginia, would have completely exempted all Social Security income from personal income tax. The Senate amended it so that a married couple making over $100,000, or a person filing individually making over $50,000, wouldn’t qualify.
Senators also amended it so that it is phased in over three years. For taxable years beginning in 2019, 25 percent of the Social Security benefits are exempt; in 2021, 50 percent; and in 2021 and thereafter, 100 percent.
The left-leaning West Virginia Center on Budget and Policy had argued the bill would only benefit the wealthy, prior to the cap.
Sean O’Leary, senior policy analyst with that group, said the legislation is better now, but would still mainly benefit well-off people. He said people who receive less than $21,000 annually won’t see a benefit, and those receiving between $21,000 and $36,000 annually will see an extra $30 to $40.
“It’s definitely better that it’s phased-in and there’s a cap on it but we still know that the state has a lot of unsolved issues that we’re going to need revenue for,” he said, pointing to PEIA, road repairs and education.
Del. Jeff Pack, R-Raleigh, said he co-sponsored the bill because he wanted to help struggling seniors on fixed incomes.
“I thought that we are one of the very few states in the country that still taxes this,” he said. “People worked hard all their life. I think we need to try to provide some relief for folks that are in their retirement on a fixed income. Prices of everything keep going up. I think it’s the least we can do for our seniors.”
According to a fiscal note, the legislation is expected to reduce General Revenue Fund collections by roughly $2 million in fiscal year 2021, $5.8 million in fiscal year 2022 and $25.2 million in fiscal year 2023.
“The value of the proposed tax exclusion will grow over time as the population ages and the number of individuals receiving Social Security benefits increases,” the fiscal note reads.
Email: firstname.lastname@example.org and follow on Twitter @3littleredbones