TEMPORARY DEFERRED AND PASSIVE INCOME TAX (DPIT).

Largely to assure revenue neutrality, by initially using the least objectionable, narrow aspect of a general individual income tax, it is proposed that a low-rate (3%) flat rate tax be temporarily imposed on income that was deferred (and not taxed) before repeal of the current PIT and on interest and dividends. Thus, the deferred income, to be taxed (for the first and only time), would only consist of distributions from tax-deferred private qualified plans such as IRAs 401Ks, etc.

The tax would not apply to an individual’s receipt of social security retirement benefits or public (federal, state or local) retirement plan benefits. Moreover, a provision would be included which required this tax to phase out as certain fiscal milestones are reached and, in all events, as the funds in each individual’s pre-reform private deferred income plan account are fully withdrawn.

REDUCED RELIANCE ON DECLINING AND UNCOMPETITIVE SEVERANCE TAX.

Both to reduce fiscal reliance on the declining market for coal, and to extend much-needed relief to the nation’s most heavily-taxed extractive industries, it is proposed that the severance tax rate for coal, oil and gas, be reduced by half from 5% to 2.5%, which would include and retain, in the case of coal, the 0.35% portion of the tax rate dedicated to local governments. It is further proposed that the recently reinstated severance tax on timber production be permanently and immediately repealed as it represents a major outlier in the taxation of timber in the mid-Atlantic region which, in turn, causes West Virginia’s timber industry to be uniquely uncompetitive in that commodity market.

RETAINED SPECIAL CONSUMPTION TAXES: B&O, INSURANCE PREMIUMS AND CERTAIN “SIN” EXCISE TAXES (E.G. ON ALCOHOL AND TOBACCO).

It is proposed that certain of the existing special consumption taxes, paid by purchasers and collected by vendors, be retained for their efficiency and capacity to shift the incidence of tax to the beneficiaries of the service or product using them. For example, because the economic incidence of the business and occupation tax on electric power generation falls, in large part, on out-of-state utility customers, that is an arrangement which, good policy dictates, ought to be retained. However, the infamous “pop tax” on purchases of soft drinks should be eliminated.

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Have a tax question, contact Michael Caryl.

The Fair 55 Tax Reform Plan (Part 1)

The Fair 55 Tax Reform Plan (Part 2)

The Fair 55 Tax Reform Plan (Part 3)

The Fair 55 Tax Reform Plan (Part 4)

The Fair 55 Tax Reform Plan (Part 5)

The Fair 55 Tax Reform Plan (Part 6)

The Fair 55 Tax Reform Plan (Part 7)