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Starting Monday, West Virginia's food tax is gone

CHARLESTON, W.Va. -- Starting Monday West Virginians will no longer pay any sales tax on groceries.

The change is the culmination of a process that began in 2005, as the food tax has been incrementally reduced from 6 percent down to 1 percent on its way to being completely phased out.

The elimination of the tax applies only to food that is to be prepared at home. Prepared foods, food from vending machines and soft drinks will still be taxed.

The tax on food has been 1 percent for the last year.

"For too long West Virginians have been burdened by a regressive tax on one of life's basic necessities," Gov. Earl Ray Tomblin said in a written statement Sunday. "The elimination of the food tax allows families to keep more of their hard-earned money."  

A January study by the state tax department estimated that eliminating the food tax would cost the state $174 million per year in revenues.

A 2011 law ordered the food tax to be eliminated, contingent on the fact that the state's Rainy Day Fund had enough money in it.

The Rainy Day Fund needed to be at least one-eighth as big as the state's general revenue fund, a benchmark that Tomblin said it reached in December 2012.

As of May 31, the state's two Rainy Day Funds had a total of more than $930 million.

The Rainy Day Fund has grown by nearly $20 million so far in 2013 even as tax collections have continually lagged behind expectations, forcing cuts and fiscal reshuffling.

The Rainy Day Fund is described by the state Budget Office as, "used by the Legislature to offset a shortfall in revenues and to allow the Governor to borrow funds when revenues are inadequate to make timely payments of the State's obligations."

Revenues have continually fallen short of expectations, but Tomblin has turned to other sources to cover shortfall.

The state's general revenue fund, which is primarily funded by income and sales taxes, was expected to be $93 million below initial projections as the fiscal year came to a close on Sunday.

Tomblin announced on Friday that he was, by executive order, cutting nearly $18 million from future Medicaid funding.

Acting revenue secretary Jason Pizzatella told the Associated Press on Friday that the cut was temporary and they would ask the Legislature to restore the funds during their next session.

In April Tomblin asked the Legislature to cut $28 million from the budget, in addition to the already planned 7.5 percent across-the-board spending cuts.

The state also used a $45 million special account, normally used to pay income tax refunds, to fill in disappointing tax revenue.

The state Constitution requires a balanced budget at the end of every fiscal year.

"The elimination of the food tax is part of a larger effort to make the tax system fairer, efficient and balanced for both families and businesses," Mark Matkovich, the state's acting tax commissioner, said in a written statement.

West Virginia has also passed legislation that will, in the near future, cut corporate income taxes and a tax on business equity.

Reach David Gutman at david.gutman@wvgazette.com or 304-348-5119.

 


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