Deja vu

I give Gov. Jim Justice credit for pointing out that some promised remedies for West Virginia’s ills didn’t pan out. In a televised town hall meeting, he told the audience:

“Really and truly, let’s just be brutally honest. We passed the right-to-work law in West Virginia. And we ran to the windows looking to see all the people that were going to come — and they didn’t come. We got rid of prevailing wage. We changed our corporate taxes and we’ve done a lot of different things. And we’ve run to the windows and they haven’t come.

“We’ve absolutely built the field in a lot of different places thinking build the field and they’ll come, and they didn’t come.”

It’s hard to argue with that. The promised benefits of West Virginia’s 2007 tax cuts under the leadership of one party never happened. And the state has lost about 60,000 people, more than the population of its capital city, since the push for anti-worker legislation began in 2015 under the leadership of another party.

The governor promises that things will be different this time around, with his plan to drastically cut or phase out the state income tax. I’m sure he has the best of intentions, but, for some reason, I keep thinking about Lucy holding the football for Charlie Brown to kick, in the old Peanuts comic.

(In case that cultural reference is dated, it didn’t work out well for Charlie Brown.)

The state income tax provides more than 40% of revenue for the core state budget, to the tune of over $2 billion per year. Eliminating or drastically reducing it would involve shifting taxes to the least wealthy or eliminating state investments in people, infrastructure and health at all levels. Or, more likely, it will mean a bit of both.

West Virginia’s income tax is the only progressive tax in the state, meaning that those with more resources pay a somewhat higher rate. According to an analysis of the proposed legislation, 63% of the tax cuts will go to the top 15% of earners. Proposed rebates notwithstanding, overall taxes likely would go up on people in the lower 60%, who, by necessity, spend most of what they make on taxable goods and services.

Even if all the proposed new and/or increased taxes are enacted, it would still leave a budget gap of about $185 million. That means that more cuts to state programs and services would be required. And that’s assuming that the Legislature agrees to all aspects of the plan, which seems pretty iffy.

The plan includes an increase in the regressive consumer sales tax to 7.9%, increasing excise taxes on soft drinks, beer, wine, tobacco and such; taxes on “luxury goods;” and taxing some new services. All these are likely to arouse a great deal of opposition from retail and industry groups, which have a long history of getting pretty much whatever they want from compliant lawmakers.

We also can be sure of hearing a rousing round of protests from and about the economic impact on border counties, if West Virginians take their purchasing power elsewhere. About 30 counties are at or near the border of another state. More to the point, our colonial overlords extracting the state’s mineral wealth might not be happy about changes to severance taxes.

If these groups get their way, the revenue hole to be made up would be even deeper and the overall package probably would include even more budget cuts.

Proponents claim that any impact will be more than compensated for by the hordes of new people flooding into the state. However, as a saying variously attributed to Yogi Berra, Mark Twain and many others goes: “It’s tough to make predictions, especially about the future.”

I will venture to make one, however: If West Virginia’s leaders cut investments in the things that make a place worth living in — good schools, higher ed and job training, child care, parks and natural resources, public libraries, good roads, broadband, access to health care, support for the elderly — nothing will stop the bleeding of our youngest, best and brightest.

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

West Virginia's race to the bottom

 It seems like West Virginia's current crop of political leaders is hellbent on achieving full failed state status. Instead of investing in education, infrastructure, health, environment and quality of life, Gov. Justice and legislators, especially in the state senate, want to eliminate the state income tax, which brings in around $2 billion per year and makes up around 43 percent of the state's core budget.

The income tax is the only progressive tax in the state, meaning that those with higher earnings pay a somewhat higher portion. The only way to phase it out is to raise regressive taxes, which hit people with lower incomes hardest or to cut public services and programs. Or, more likely, a combination of both. 

Leaders in the house of delegates would like to phase out certain business equipment taxes which brings in $400 million or so mostly to county governments and public schools. This would also impact the ability of counties to pass levies to promote things like libraries and emergency medical services.

Oh yeah, then there's a plan to divert money from public schools via "education savings accounts" for private schools.

One of these days I'd like to hit bottom. It might be better than spiraling downward forever.

Another bad idea

 Some of West Virginia’s political leaders want to abolish the state income tax. One has even said doing so would help bring 400,000 new people to live in West Virginia.

If memory serves, some of the same people predicted that abolishing the state’s prevailing wage for workers on public building projects would save the state $200 million to $300 million a year.

That didn’t happen. In fact, a study released in 2019, albeit from a pro-labor source, found it lowered wages for construction workers, worsened workplace safety and substantially reduced the number of young people in apprentice programs that would set them on a path to lifetime economic security. There wasn’t evidence of savings for the state either.

I think the latest prophecy might meet a similar fate.

The state’s income tax brings in almost $2 billion per year, or over 40% of West Virginia’s basic budget. Most of that goes to K-12 education; health and human services for seniors, children, and working families; post-secondary education; and things like public safety, libraries, parks, natural resources and other public goods.

It’s also the only progressive tax in the state, meaning that those with higher earnings pay a somewhat higher rate. Otherwise, West Virginia’s tax system is already upside down, with lower income residents paying a higher share of their income in taxes than the very wealthy due to regressive sales and excise taxes.

The West Virginia Center on Budget and Policy has calculated that the 20% of West Virginians with the lowest income ($15,900 a year or less) pay 9.4% of their income in taxes. The wealthiest 1% (with earnings of $401,600 or more) pay 7.4%.

Adam Smith would not approve. In his justly famous “The Wealth of Nations” (1776), widely regarded as a classic celebration of capitalism, he wrote, “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

If the income tax is phased out, it will be made up for either by increasing regressive taxes that will hit lower income people the hardest or by cutting the services they rely on.

Generally speaking, families and businesses want to locate in places with good schools, a good quality of life and a well-trained workforce.

I’d be surprised if 400,000 new people will want to rush into a state with defunded education and training, a crumbling infrastructure, a degraded environment, a lack of the public goods that make a place desirable and an unhealthy workforce.

I think it’s far more likely eliminating the income tax would only speed up our ongoing exodus.