Gov. Jim Justice likes to think big, and he’ll tell you so himself.
So, when Big Jim looked at state personal income tax rates, which top out at 6.5% for incomes of $60,000 or more, he saw an egg-sucking problem.
On paper, that maximum looks higher than those in our border states, and as Justice has pointed out on more than one occasion, we’re surrounded by border states.
Virginia and Maryland top out at 5.75% (although in Virginia you max out at just $17,000 of income). Ohio’s max is 4.797%, while Pennsylvania and Kentucky feature flat rates of 3.07% and 5%, respectively.
As tends to be the case, comparing tax rates is a tricky thing, since all our border states except Virginia permit local income taxes, which can add another 1.2% in Kentucky and Pennsylvania and more than 1.5% in Ohio.
While 6.5% is a tad high comparatively, 17 states have higher maximum income tax rates, ranging from 6.6% in Arkansas to 12.3% in California, although like many states with high maximum rates, that doesn’t kick in until you’re really pulling down the big bucks.
That’s why they’re called progressive taxes.
Using a hypothetical couple with $100,000 income and a house assessed at $200,000, the couple will pay higher income tax living in West Virginia, but their property taxes will be far lower than in any of the border states; in fact, about a third of what they would pay for the same house in Pennsylvania or Ohio.
Since state sales taxes in all six states are pretty much a wash, the couple’s tax burden starts to fall in line, being lower than two states and slightly higher than the other three.
Taking advantage of West Virginia’s lower cost of living, our hypothetical couple is making out as well or better living here than in neighboring states when it comes to finances.
(Which might well explain the boom of metro Washington commuters opting to live in the Eastern Panhandle over closer locations in Maryland or Virginia.)
The point being, there are a myriad of factors that come into play when businesses decide where to locate and individuals decide where to live.
When Justice and other income tax repeal advocates say no income tax states are growing, so we need to repeal our income tax, that’s more than a tad simplistic.
Granted, four of the 10 states that had the most population growth in 2019 have no income tax, but Alaska also has no income tax and had the second largest population loss, behind only West Virginia.
Idaho was the fastest-growing state in 2019, and its maximum income tax rate of 6.925% kicks in at just $11,554 of income.
Three other top-10 population growth states — South Carolina, Delaware and Montana — have maximum income tax rates of 6.6% or higher, and South Carolina and Montana’s max rates kick in on incomes of under $20,000.
Meanwhile, there are tradeoffs to having no income taxes. Move to Tennessee, and you’ll be paying about 60% more in sales taxes. Move to Texas, and your property tax rates will be more than 3½ times higher than what you pay here.
West Virginia legislators long have been accused of nibbling around the edges when a big bite was required, but this seems a case where caution makes sense, particularly when we’re talking about the state’s single largest source of revenue, bringing in about $2.1 billion a year or 43% of the total general revenue budget.
Slashing that in half, losing $1 billion a year of revenue, with some not fully vetted belief that it will not only stem continuing state population losses but have people lining up to move here seems way too risky.
Likewise, Justice was too dismissive Wednesday of the negative impact of raising the state sales tax to 7.5% (which would be 8.5% in many municipalities), telling retailers they’ll have so many new customers they’ll barely notice the ones they’ve lost to border states.
When it comes to location, the foremost requirement for business is an educated, healthy, drug-free workforce. For individuals, it’s infrastructure, services and quality of life.
West Virginia is lacking in all those areas and blowing a proverbial cannonball to the gut of state revenue will make it nearly impossible to improve.
Instead of taking a huge bite, this is a time that calls for nibbling.
Maybe try eliminating the 6.5% over $60,000 tier. That would lower our maximum rate to 6% for incomes of more than $40,000, making it so we no longer stick out compared to our neighboring states.
If the lower tax rate does indeed attract more business, then look at gradually phasing it out.
Seems wiser than going the route of Kansas, which blew up its budget believing, “If you slash it, they will come,” only to discover, no, they won’t.
Speaking of attracting young, educated professionals to the state, a glance through bill introductions won’t do much to persuade them West Virginia is anything but a deep red, backward, intolerant, closed-minded state.
A sampling of bills introduced the first day of the session: HB2141, making it a crime to allow transgender athletes to compete in high school sports; HB2157, prohibiting the teaching of sexuality in public schools; HB2174, making it illegal to remove or relocate Confederate statuary (the bill is so sloppily written the title says it is the Memorial Protection Act of 2020 and the text says it is the Memorial Protection Act of 2019).
HB2202 would ban cities and counties from adopting broader nondiscrimination ordinances than state law, with the intent of overturning LGBTQ nondiscrimination ordinances adopted by 14 municipalities statewide; HB2216 would nullify all current or future federal, state or local laws restricting, taxing or regulating possession of firearms (one of a multitude of bills that would repeal gun safety regulations, including one allowing guns in the Capitol); HB2271, exempting private and parochial schools from compulsory immunization requirements; SB87, making it a felony, punishable by up to five years in prison to perform an abortion (one of multiple anti-abortion bills); SB118, requiring physicians to notify parents when prescribing contraceptives to minors.
And that’s just one day of bills. I’m sure there will be plenty more to give pause to young, educated professionals either considering moving to (or leaving) West Virginia.
It’s early, but all signs are ominous for the legislative session.
Not only is the public being held at arm’s length, essentially prohibited from entering the Capitol. The public also is being blindfolded.
A few years back, the Senate invested in equipment to allow live video streaming of all committee meetings, a task simplified by the fact all committees meet in one of two committee rooms.
The House of Delegates, which uses four committee rooms for meetings, did not follow suit and has audio-only streaming of committee meetings.
To ensure social distancing, all House committee meetings this session are taking place in House chambers, which has video streaming capability, or in the Government Organization Committee room, which does not.
Inexplicably, House leaders decided the public should not be allowed to observe committee meetings in House chambers, with the camera fixed on the chamber clock during live streams. (Perhaps to remind us life is fleeting, and one could find a better way to spend one’s precious moments.)
Having locked out and blindfolded the public, House leadership apparently also wants the public to be silenced.
At the start of the session, House leadership changed a longstanding House rule requiring committees to hold public hearings on bills under consideration, upon request.
Using the pandemic as a cover, House leadership eliminated the rule that required hearings to be conducted before committees can proceed with consideration of bills. Leaders gave committee chairpeople the option of whether to have hearings at all.
The first test of that rule change came on day two of the session, when Delegate Evan Hansen, D-Monongalia, requested a public hearing on HB2007, the first of a series of cut-and-paste bills to water-down occupational and professional licensing requirements, a request denied by House Government Organization Chairman Brandon Steele, R-Raleigh.
This public-be-damned attitude is made worse by House Speaker Roger Hanshaw’s intent to run a bunch of controversial bills through the House lickety-split in the first days of the session by using single committee references.
Suffice to say, single-shooting bills is a sure recipe for bad public policy.
When I write something for this fine publication, it goes through at least two sets of eyes, beginning with a city editor, who looks at the substance of the article, making sure there’s proper attribution and the material is factually correct. From there, it goes to a copy editor, who primarily checks spelling and grammar and to make sure I haven’t tried to sneak in “ironically” for “coincidentally,” as I am wont to do.
The committee process serves a similar function for legislation.
Going through two or more committees in each house means there are more eyes on each bill, assuring that issues of substance can be worked out and members can speak out if there are attempts to ramrod questionable legislation.
Hanshaw’s excuse for rushing bills is flimsy, that the House has to act posthaste in case a COVID-19 outbreak at the Capitol would require pausing the session.
Hey, we’ve got all year to get the 60 days in. Nothing precludes the Legislature from recessing to an agreed-to date in the future.
Now that President Joe Biden is speeding up delivery of COVID-19 vaccines, it’s conceivable that by late spring or early summer, it would be possible to have a fairly normal session, one with public participation, openness and transparency.
However, the game plan in both the House and Senate appears to be to take their supermajorities and ram through as much as they can as quickly as possible.
(The Senate is no paragon of virtue in all this: By my count, 59 of 124 bills introduced on day one are single-shotted.)
Elections have consequences, and West Virginians are about to pay the piper.