May 19, 2017

Groundhog Day, WV style

In Bill Murray’s classic movie, “Groundhog Day,” the main character winds up having to live through the same day over and over.

West Virginia’s ongoing budget crisis and standoff is starting to remind me of that ... minus the personal growth, romance and happy ending.

The twisted path to our current mess goes back several years, beginning with hundreds of millions of dollars in tax cuts first enacted around 10 years ago. We were told that the business tax cuts “would pay for themselves,” something which has never happened anywhere.

They didn’t.

We were also told the cuts would lead to the creation of many new jobs.

They didn’t.

We have several thousand fewer private sector jobs in the state now than 10 years ago.

Take those ingredients, shake, and throw in market-driven declines in the coal and gas industries, and that’s the recipe for how we got here.

Over the past several years, around $600 million has been cut from the state budget, including higher-education spending, which has declined in absolute and relative terms. There’s not a lot of fat left to trim. Further cuts would likely harm kids, college students of all ages, seniors, veterans and working people, not to mention everyone else.

Many of the current crop of legislators are opposed to tax increases to make up the difference. Last year, the budget controversy nearly led to a partial state shutdown. And things aren’t all that rosy this year.

One idea for a resolution to this problem is a “compromise” proposal supported by the Senate and Gov. Jim Justice, all for the best of reasons.

On the positive side, the compromise would avoid the possibility of a partial shutdown and would provide a temporary increase in revenue.

On the downside, proposed cuts to the state income tax would cost the state more over time than any increases in revenue from consumption taxes.

This would mean an ongoing budget crisis every year, with more and more painful cuts to things we need, like schools, higher and vocation education, public safety, health care, etc.

That would be the bad “Groundhog Day” part.

On top of that, the kinds of taxes that would increase are regressive, meaning they would hit people with low incomes hardest. Those with higher incomes would get a big break, since income taxes are progressive, in that they are the only state tax actually based on ability to pay: The rate goes up a bit as income grows.

It’s been argued that this shift from income to consumption taxes would be the biggest tax cut for the rich in West Virginia history, which is saying something.

Think Robin Hood in reverse.

There is a better way. A number of citizen groups, as well as political leaders, have proposed a simple solution to the mess that would avoid cuts to education, public broadcasting, higher ed, the Promise Scholarship, health and human services, etc. It would avert a shutdown. It would not blow a huge hole into future state budgets. It would also avoid the “Groundhog Day” effect of repeated annual crises.

The proposal:

1. A modest increase in the sales tax from 6 percent to 6.5 percent.

2. Expand sales taxes to cover services and industries that have so far avoided taxation.

3. Enact a fair-share tax of 1 percent on incomes over $200,000.

4. Offset the impact of higher sales taxes on low income families by enacting a 5 percent Earned Income Tax Credit.

Taken together, these measures would provide around $270 million in revenue.

It’s not a silver bullet, but it could point the way to a fair solution, or at least shift the conversation to a more productive direction.

If we don’t come up with a better solution, on the order of this one, West Virginia is likely to share the fate of Kansas, where ill-advised tax cuts once again failed to deliver and left things in shambles.

In baseball, that would be called an unforced error.

You could also call it a series of really bad Groundhog Days.

(Note: this appeared in today's Charleston Gazette-Mail.)

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