WVU tax law professor says new tax law will offer 'some benefits' to citizens, but on 'scattershot' basis

By Carrie Salls | Feb 12, 2018

MORGANTOWN – West Virginia University tax law professor Elaine Wilson says she believes “individual income tax changes, standing alone, will generally help most individuals in West Virginia,” but said she does not believe new business tax changes “will make much of a direct difference to low-income individuals in West Virginia.”

Regarding tax changes that apply to individuals, Wilson told The West Virginia Record that the new federal Tax Cuts & Jobs Act (TCJA) “doubled the standard deduction and lowered rates.”

While the national average is about 70 percent of the population takes the standard deduction, Wilson said about 83 percent of West Virginians took the standard deduction in 2015, and of the 17 percent that did itemize, roughly 63 percent of them had adjusted gross income of more than $75,000 annually.

“Thus, the rise in the standard deduction generally helps lower-income workers, and since West Virginia is generally poorer than other states, it will help,” Wilson said. “It is hard to estimate how the child tax credit swap for the personal exemption will work out – I suspect it will mostly be slightly positive or a wash for most.”

Specifically, Wilson said “the structure of the new business income tax deduction (Section 199A) may help some lower-income individuals that are essentially self-employed: plumbers, handymen, etc. There are some favorable provisions in that section that are generally helpful to self-employed types earning business income under $157,500 single.”

Despite that positive news, Wilson said “the planning under Section 199A is so complicated that I wonder whether those who might benefit won’t have any idea how to take advantage of it due its complexity and some planning that might occur.”

“While the increase in the standard deduction for individuals will end up with some needed tax simplification, new Section 199A is not tax simplification in any way, shape or form,” Wilson said. “The short-term fix may be for organizations that work with low-income population to do some educational outreach. Long term, I doubt there is much to be done other than completely re-writing this mess of a section.”

Wilson said business tax cuts could also help low-income West Virginians “if businesses use them to create jobs and/or raise wages,” but she said “there is absolutely nothing in the TCJA that requires a business to use the funds it receives from tax cuts for either of these things.”

Wilson said widely publicized bonuses that are being offered companies following the passage of the tax reform legislation “seem to be in nationwide companies and those that have high labor force requirements, so it’s hard to say if this will translate to West Virginia, which is not the home to many of these types of companies.”

“In sum, I think that there will be some benefits for some West Virginia workers, but will be on a scattershot, company-by-company basis, and may be offset by other restructuring.”

Even if workers do receive a “one-time bonus and small tax refund,” Wilson said that extra money will do “little good if the cost of milk goes up, the rate on your car loan or student loans goes up, your insurance premiums increase (or you lose health care totally), and you no longer qualify for government programs."

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