Big stakes for schools riding on November ballot

 Those of us of a certain age who remember a certain debacle in the Middle East, might also remember when then secretary of defense Donald Rumsfeld said in a justification for the war on Iraq:

“As we know, there are known knowns; there are things we know we know. We also know there are known unknowns. But there are also unknown unknowns—the ones we don’t know we don’t know.”

I was reminded of this famous “known unknowns” soundbite recently after hearing the concerns raised by the Raleigh County commission regarding Amendment 2, the property tax amendment that the state legislature voted to put on the ballot in the upcoming November election.

A county commissioner said that “the unknowns are what scares everybody,” and because of this uncertainty, Raleigh County is among fifteen county commissions to date that publicly oppose Amendment 2. 

The commissioner is spot on, there are many scary unknowns as to how counties could make up for the potential loss of $515 million in revenue if Amendment 2 passes muster with West Virginia voters.  

There are also some known knowns, the first of which is who is behind this effort to strip local county governments of the power to set business and manufacturing property tax rates, and give that authority over to the state legislature.  Just follow the money.  

Of the estimated $515 million in revenue generated by these taxes for the counties, over seventy per cent is paid for by large businesses, the majority of which are wealthy, out-of-state corporations who want nothing more than another tax break.  

To be sure, these moneyed interests have been lobbying our legislature for years to eliminate this tax.  Putting a constitutional amendment on the ballot is their latest attempt.  

Another known known is who stands to lose if Amendment 2 were to pass, and the list is long. Nearly all of these business property taxes fund local services including public schools, libraries, EMTs, firefighters, among many other public goods and services.  Amendment 2 would permanently eliminate local control over one of the biggest funding sources for these critical public services.   

And lest we forget that it’s these public services that businesses one way or another rely on, to educate future employees, keep their employees and their families safe in emergencies, and create a thriving community where businesses would want to locate. 

In the “known unknown” category is what will future legislators do.  A common defense of Amendment 2 is that it doesn’t mean the legislature will cut these business and manufacturing taxes, it simply means they can.  

But the truth is that current politicians cannot say that future legislatures will ensure counties have adequate revenue.  Because of the inherent unpredictability of power at the state legislature, assurances made for revenue replacement can be nothing more than empty promises. 

Speaking of promises, after Labor Day West Virginians will be inundated with fancy ads on TV, in print, and on the radio tying a vote for Amendment 2 to a break on their car tax.  Gee I wonder who will be paying for all that expensive advertising.    

Fortunately a known known is that West Virginians have a keen eye for a wolf in sheep’s clothing.  The sheep will be the “car tax promise” and the wolf is a $515 million power grab away from local governments.  As the saying goes, remember in November! 

(This op-ed was published in the Charleston Gazette Mail by my co-worker Lida Shepherd.)

Corporate tax cuts or kids and colleges?

Back in 2007, the West Virginia Legislature dramatically changed the state’s tax system, reducing business taxes by hundreds of millions of dollars per year. The package included phasing out the business franchise tax and reducing the corporate net income tax from 9 percent to 6.5 percent. Other cuts and credits would follow.

The annual dollar amount of the cuts, at least $250 million, would have been more than enough to cover the costs of undergraduate tuition for every West Virginian enrolled in state universities, which could have really been a game changer for the state.

Talk about a road not taken.

It was argued at the time that these tax cuts would “pay for themselves,” a scenario about as probable as the belief that if you take gasoline out of your car you can drive it farther. What we did get in that department was an almost annual budget shortfall, including a gap of $27 million this year that had to be made up by one-time transfers from the state Treasurer’s Office.

Usually, budget shortfalls translate into budget cuts.

And the governor’s annual budget report to the Legislature anticipates that the next several years will be even leaner.

This loss of funding has hit higher education particularly hard and raised tuition rates for students. The state spent less per student on higher education in 2018 than it did in 2008.

According to a 2017 report by the West Virginia Center on Budget & Policy, “Since 2008, state spending in higher education has declined by $130 million, adjusting for inflation.” Tuition rates have doubled since the early 2000s, in a state that trails the nation in educational attainment, with all that that implies in terms of lost income and lower workforce participation.

We were also promised at the time that these tax cuts would create jobs, which didn’t happen. According to the Quarterly Census on Employment and Wages, in the 10 years between 2007 and 2017, employment in all industries of all sizes fell from 706,172 to 683,807. The most recent data suggests that, at best, we’re back where we started over 12 years ago.

All of which is to say that the first 10 years of tax cuts brought the state a whole lot of nothing in the way of benefits.

Fast forward to 2020. The Legislature is once again pondering another major round of corporate tax cuts, which leads me to conclude that some people really do want it all.

The latest proposed cuts specifically involve the elimination of the business personal property tax, which covers things like machinery and equipment, tools, fixtures and inventory. There will no doubt be promises that these cuts will pay for themselves and create jobs. Déjà vu all over again.

I’m reminded of Lucy holding the football for Charlie Brown in the Peanuts cartoons.

This alleged “job killing” tax amounts to less than 1 percent of what businesses pay for materials, according to Census data. When you factor in other costs of doing business, such as payroll, energy and capital expenditures, we’re talking about something less than a rounding error. And one peer-reviewed study suggests that eliminating the machinery tax could have the unintended consequence of reducing employment by encouraging automation.

Eliminating this tax would affect state and local governments and particularly hit funding for public schools.

If enacted, these cuts will either mean our schoolchildren and public services take a hit or the lost revenue would be made up by increasing regressive taxes on working families.

It makes a whole lot more sense to invest in our children, workforce and communities.

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

Groaning with anticipation

The WV legislature's regular session starts tomorrow and I can't say that I'm dancing with joy, although there seems to be a decent chance that a few good bills may pass. One that doesn't meet that criteria is a proposal to cut business property taxes by around $140 million per year, which would most likely mean a major hit for public education.

While business property taxes have frequently been described as "job killers" by the current majority, the evidence isn't convincing. In fact, a study of similar cuts in Ohio points the other way, with an estimated loss of over 19,000 jobs. That doesn't reflect any damage done to public sector investment or employment.

This is one of those zombie policy ideas that keeps shuffling around after repeatedly being killed in years past. We could do a lot more with that $140 million than pour it down another tax cut rat hole.

Getting the band together again

Mission accomplished: winning the 2018 WV teachers' strike

As we gear up for the 2019 legislative session, I have trouble wrapping my head around the fact that this time last year the great WV teachers' and school support workers' strike wasn't much more than an angry gleam in a few peoples' eyes. It was a real reminder to me that hope can come when least expected.

Still, there are unresolved issues. Last year's raise still isn't what these workers deserve. PEIA funding in unresolved. Worse, Senate Majority Leader Mitch Carmichael wants to eliminate the business inventory tax, which currently brings in $140 million per year, most of which goes to local school districts.

The promise apparently is that this cut, which mostly benefits out of state corporations, will create jobs and won't hurt funding for education....kind of like the last round of business tax cuts would create jobs and pay for themselves. 

Except they didn't.

History doesn't repeat itself, but it's good to know that West Virginia can still go West Virginia on itself.