Earlier this year, the West Virginia Legislature and Gov. Jim Justice agreed on the largest tax cut in state history. The new law will allow individuals and small businesses to save a total of $750 million a year on their taxes.
A key provision allows West Virginians to receive a dollar-for-dollar credit on their income taxes for the personal property tax on their vehicles. That annual tax is one of the more hated elements of the state tax code. Critics call it the 13th car payment of the year.
Justice and lawmakers agreed the credit, even though it’s somewhat complicated, would be a way to allow West Virginians to have that paid tax be a credit against the amount owed to the state or an addition to their refund.
However, the legislation resulted in what I suspect was an unintended consequence.
The state’s vehicle property tax collection system operates on a fiscal year calendar, while income taxes are on the calendar year. The vehicle tax credit does not begin until Jan. 1, 2024, but the vehicle tax bills for the previous fiscal year are already being received.
State and county officials have tried to spread the advice that taxpayers should only pay half now, so that when they pay the second half in early 2024, they can claim that second half amount as a dollar-for-dollar credit on their 2024 taxes.
However, many West Virginians have a habit of paying the full year when they receive the bill. As a result, those taxpayers would not be eligible for any portion of the credit. Legislative leaders and the Justice administration now realize that will be unfair to those taxpayers.
“The fact that people do the responsible thing and pay their tax bill in full is a good thing,” said House Speaker Roger Hanshaw on Talkline last week. “That’s not something that I think that we ever want to intentionally disincentivize.”
Hanshaw, Senate President Craig Blair and representatives of the Justice administration are now working on a change to the new tax law that would allow individuals who have paid, or will pay in full now, to claim the credit on the second half of the payment.
Blair said on Talkline that he hopes Justice will include that change on the call for the upcoming special session, which could coincide with the August interim committee meetings that begin Sunday. Blair said he think changing the law to accommodate taxpayers who want to pay in full now will pass the Legislature easily.
The state predicts that the vehicle tax break, as it is currently written, will save taxpayers — and thus cost the state — about $140 million. Changing the law to ensure all vehicle owners who pay in a timely fashion, including those who want to pay the full year now, is already factored into cost. So there is no reason not to make the fix to avoid penalizing responsible taxpayers.
