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Mark Sadd: Don’t mess with taxes? Maybe we should (Daily Mail)

Mark Sadd

In hindsight, sneaking the elimination of a tax was easy.

In 1996, I drafted a long list of policies for then-gubernatorial candidate Cecil Underwood to talk about on the trail. During his campaign, I don’t believe he ever mentioned repealing West Virginia’s intangible personal property tax on stocks, bonds and notes, though easy pickings, I had thought.

But there it was on his sleeve of promises. To their credit, Gov. Underwood and a Democrat Legislature eventually phased out the tax. By 2003, it was gone.

The intangible personal property tax was probably the next-most ignored tax law on the books. (The use tax was probably the most and still is.) It was a nearly unpunishable and a certainly irritating tax.

It netted only a few million to the state treasury. The political and fiscal costs of truly enforcing it would have been sky-high. Thus, it was rarely enforced.

No one, including the tax collector, misses it.

A far bigger whale is West Virginia’s personal income tax, with rates topping at 6.5 percent for annual incomes of $60,000 or more. No one who earns a wage in West Virginia escapes the tax. The lowest rate is three percent for earners making less than $10,000 a year.

I’ve been huckstering for reducing or, if my heart’s desire be fully told, eliminating the personal income tax for more than a decade.

But I have always also done so while advocating increasing other broad-based taxes, such as real estate and consumer sales taxes, to compensate the state treasury for the losses from a reduced or eliminated personal income tax.

Phil Kabler of this newspaper has just called the idea of cutting West Virginia’s personal income tax a “wacky, trickle-down, Reaganomics-on-acid income tax cut proposal.”

These are loaded words assembled to disrepute a tax reform idea without having to do the heavy lifting of thinking about it or explaining why he disparages it.

I do not propose that he break old habits. Still, readers deserve better because tax reform is such a large topic worthy of debate and not of name-calling.

If eliminating the state personal income tax is wacky, that makes Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming wacky. They have no or almost no income taxes.

If we stipulate that the opposite of wacky is wise, perhaps advocating a bill to increase the state personal income tax would be a fabulous bit of wise legislation.

That isn’t fair to Kabler either. He doesn’t say it, but I surmise that part of his criticism of cutting the personal income tax would be that it would deprive state government the cash to operate or cause it financial instability.

These are worthy concerns that are diminished in the context of facts. Every proposal to cut the state personal income tax I have seen is always made with a proposal to increase other taxes. They would be phased out or in over time.

To a broader point, recent proposals under consideration in the Legislature seek to cut the income tax and not tax revenues. That is important to remember: taxes and tax revenues are not the same thing.

The position of the anti-reformers does not account for loss of tax revenues from West Virginia’s plunging workforce participation rates.

The state collects fewer personal income taxes because there are fewer persons making incomes while others who should be working are not working. West Virginia has the lowest workforce participation rate in the nation, the only state whose rate is less than 50 percent.

There are real consequences. On Tuesday, the state tax collector reported that personal income tax revenues missed the August estimate by $10.5 million, or almost eight percent. That causes financial instability.

Tinkering with taxes while keeping tax revenues should aspire to growth, including in workforce participation.

As for Reaganomics, that would carry a badge of honor, as pro-growth reforms go. President Reagan targeted the growth of government spending, regulation, the expanding money supply and, to be sure, both federal capital gains taxes and income taxes. He largely succeeded.

Cutting taxes did affect taxpayer behavior. During the Reagan years, the nation experienced transformational growth and created millions of jobs.

Cutting state taxes plainly isn’t the same thing. A state cannot command fiscal or tax outcomes for the whole country while the federal government can, largely eliminating unequal effects among the states.

As with any state tax reform under advice, it is about both staying competitive and, as I might say in response to entrenched Kablerism, pursuing wealth and job growth.

Isn’t it always about growth?

I might have once remarked to Underwood: “As the forest said to the tree: ‘We’re cutting you for timber. Can’t you see? This isn’t about you. It’s about me’.”

Daily Mail columnist Mark Sadd is a Charleston attorney and former Daily Mail business editor. He can be reached at msadd@lgcr.com.

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