Changes could be coming to taxes on West Virginia gambling winnings.
Gov. Jim Justice’s personal income tax reduction plan aims to chop state personal income tax by 50% over three years. Now, House Bill 2526 is in the hands of the Senate Finance Committee.
According to WV News, Vice Chair Sen. Mike Oliverio said the committee members want to make Justice’s plan “a little bigger, a little bolder.”
Among the proposed changes in HB 2526 is the rate of withholding West Virginia gambling winnings. The changes would reduce the rate by 50% over the course of three years.
About withholding West Virginia gambling winnings
In West Virginia, gambling and lottery winnings are taxable as personal income. Casino gambling, WV sports betting, and WV online casinos are all legal and supervised by the West Virginia Lottery.
As of now, the Mountain State does not withhold gambling taxes for state purposes. However, if the winner does not provide proper identification, the state must collect 6.5%.
Conversely, the West Virginia Lottery must withhold federal and state taxes for each prize of more than $5,000. The lottery withholds 24% of winnings for federal taxes.
Additionally, non-US resident prizes are subject to federal backup withholding, according to the lottery’s website.
Gov. Jim Justice’s income tax reduction plan is ‘on the road’
In an effort to sway Mountain State residents toward his new plan, the governor hosted a series of town hall events. Those events gave him a chance to discuss plans and field questions.
It’s worth noting that the House of Delegates passed HB 2526 without any major changes. The bill passed with a 95-2 vote.
According to Justice, though, he’s not trying to pressure any members of the Senate with his travels. “This is not about anything other than education,” he told WV News.
Justice said he thinks his current plan is a key step in doing away with West Virginia personal income tax altogether. He told WV News:
“The faster we can layer in more (tax cuts) in West Virginia and eliminate our personal income tax, [the faster] this state will grow in population and grow in business opportunities like you can’t imagine. We’re absolutely in the right spot.”
What other changes could come out of House Bill 2526?
Justice’s 50% decrease in personal income tax would take place over three years. In the first year, it would decrease by 30%. Then, in both the second and third years, it would drop by 10%.
The first set of graduated income tax rates is retroactive to Jan. 1. The second set takes effect Jan. 1, 2024, while the third would go into effect exactly one year later.
In addition to the rate of gambling winnings, the tax rate on nonresident composite and withholding obligations would drop by 50% over three years.
HB 2526 also outlines the concept of establishing a personal income tax reserve fund. The West Virginia revenue secretary would need to deposit the first $700 million of all surplus revenues into that reserve fund. Money in that fund would go toward anticipated shortfalls from cutting the tax.
A fiscal note attached to HB 2526 indicates a decrease in general revenue fund collections. It would drop by:
- $161.8 million in fiscal year 2023
- $1.084 billion in FY 2024
- $1.229 billion in FY 2025
- $1.492 billion in FY 2026
That drop is “due to underlying tax base growth,” according to the fiscal note. But according to Oliverio, the Senate might implement the 50% reduction right away, as opposed to over a three-year span.
He believes that an immediate 50% reduction could attract more remote workers.