Frying pan to fire with latest tax plan

This week, the West Virginia House of Delegates will vote on House Bill 3300, its version of repealing the state income tax. It’s quite a bit different from Gov. Jim Justice’s proposal.

While I have serious concerns about Justice’s plan, as I’ve written here more than once, I think the House version would do even more damage over the long run. The governor’s plan would at least try to balance some of the cuts with some revenue increases, even if some of these are regressive and unpopular, in an effort to preserve some programs and services.

The House version is all cuts, all the time. Basically, it would cut personal income taxes by $150 million per year over several years until it’s gone, with no effort to make up lost revenue.

This would come on top of untold millions of dollars taken from the K-12 education budget to pay for new legislation defunding public schools to pay for education savings accounts.

In 2021, the state’s base budget, made up of general revenue and lottery funds, is about $5 billion. Of that, more than $2 billion, or about 43%, comes from income taxes. Seven years out, and we’d be out over $1 billion. It gets worse from there.

The income tax is West Virginia’s only progressive tax, meaning that those with higher incomes pay a somewhat higher rate. If eliminated, more than 60% of the benefits would go to the richest 20% of residents. The pain would go to everyone else, from young children to students to workers to retirees.

This becomes clear when we consider where our tax dollars go as things stand now. Over 40% goes to public education. Nearly 25% goes to health and human resources, which provides health care and other benefits to hundreds of thousands of West Virginians, including many seniors, children and people with disabilities. About 10% goes to higher education.

What’s left covers everything from public safety to parks and natural resources to outdoor recreation/wildlife management to environmental protection to economic development to courts.

House leaders recognized, in a memo circulated to delegates earlier in the session, that an income tax repeal would have painful consequences. Specifically, the memo noted: “Such a plan will require measures that are not politically popular standing alone.”

Among the possibilities listed in the memo were across-the-board cuts to “public ed, higher ed, DHHR. This would necessarily involve a real reduction in at least some services;” “Reduction in Higher Education funding including funding to specific schools;” eliminating “all state appropriations to WVU and Marshall;” and “reduction or elimination of promise scholarship.”

Those possibilities were listed about the governor’s plan, which replaced some lost revenue. Cuts under the House plan would be even more drastic.

Contrary to a common belief, tax cuts don’t “pay for themselves,” as West Virginia’s experience has shown with the hundreds of millions in corporate cuts from reforms enacted in 2007.

We’re not an outlier in that respect. A study of tax cuts for the wealthy by the London School of Economics of 18 countries over 50 years found that “such reforms do not have any significant effect on economic growth and unemployment.”

The main things they increase are inequality and the wealth of a few at the expense of the majority. And an abundance of public health research has found that growing inequality makes other social problems worse, whether we’re talking health, crime, social trust or the lack thereof, addiction and general well-being.

Low- or no-income taxes don’t count for much, if you’re living in a wasteland.

(This ran as an op-ed in the Charleston Gazette-Mail.)

Happy 11th birthday, ACA!

It's been a bumpy 11 years since the passage of the Affordable Care Act, and there have been times I was afraid for its survival, but it's still here, thanks in no small part to the efforts of millions of people all over the place to enact and protect it. Now, we're even improving it, at least temporarily, thanks to the American Rescue Plan Act.

I know I've done this before, but I can't resist reposting this item from the day after it was signed into law in 2010, with comments from today following. To quote Dylan, "lotta water under the bridge/lotta other stuff too."

 It's official. President Obama signed the health care reform bill into law yesterday.

He told those in attendance that "We have just now enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their health care."

Critics of the bill may point out that this isn't exactly the case, but there's no denying that this is a landmark piece of legislation that will extend health coverage to millions who have been doing without it. The New York Times calls it "the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago."

It remains to be seen whether the immediate benefits (political and otherwise) will outweigh the blowback. This item from Politico argues that the former will come before the latter, but I'm not sure I agree. It always seemed to me that a major drawback of the legislation was that the major expansion of health coverage via Medicaid and subsidies won't hit until several years down the line, meaning that the risks might hit earlier than the benefits.

Still, it probably will be hard for those who want to repeal it to win much of a crowd by saying "Bring back the donut hole" for Medicare Part D, or "let's cut those young people off their parent's insurance" or "Bring back denials of coverage for pre-existing conditions!"

The game has changed, although it's hard to guess just how or how much.

Looking at the post from 2021, I'd stand by it. I've never been big on making predictions, but I think I was right in worrying that the negative consequences, political and otherwise, would hit first, long before the benefits became apparent. Eventually the positives were felt, but not before a lot of political damage was done. And that the game really had changed.

I'd prefer not to go through all that again, however.