In touting his income tax rollback plan in virtual town halls last week, Gov. Jim Justice did a very apolitical and honest thing.
He admitted recent initiatives intended to attract new businesses — slashing the corporate net and business franchise tax, enacting a right-to-work law and repealing prevailing wage — all have been failures.
“If that was enough, why didn’t they come?” he said during Monday’s town hall. “We went out and passed a right-to-work law. We got rid of prevailing wage. We built fields all over the place thinking they would come, and they didn’t come, did they?”
During Wednesday’s town hall, Justice doubled down: “Let’s just be brutally honest. We passed the right-to-work law in West Virginia, and we ran to the window looking to see all the people that were going to come, and they didn’t come. We got rid of prevailing wage. We cut our corporate tax.”
Justice is not the first to make this realization. Back in 2015, then-Revenue Secretary Bob Kiss conceded business tax cuts he had championed as speaker of the House had not paid for themselves with economic growth, as advocates had promised, but, in fact, had created a “structural imbalance” that was causing continual state budget deficits.
Also in 2015, Republicans were dead-set on exercising their newfound control of the Legislature by passing right-to-work and repealing prevailing wage bills — cloaked not as the punishment to labor unions that had backed their Democratic rivals but as ways to grow the economy.
More than one proponent, including our current Senate president, made the absurd claim that, without prevailing wage, one could build five schools for the price of three. Turned out, projects frequently end up costing more as shoddy work has to be repaired or redone.
For right-to-work, there was the nebulous claim that there were companies that won’t even consider locating in pro-union states, although those companies were never identified by name.
Then-Gov. Earl Ray Tomblin, a pretty astute businessman in his own right, saw through the claims when he vetoed the bills (to be overridden), prophetically saying, “I do not believe West Virginia needs a right-to-work law, a law that would lead to little if any economy growth and may lower the wages of West Virginia workers.”
However, for a Republican governor to come out and bluntly say business tax cuts, right-to-work and repeal of prevailing wage failed to work is remarkable. It’s practically heresy in the Church of ALEC (the American Legislative Exchange Council, a nonprofit group of conservative lawmakers and corporate interests).
Yet Justice follows that perfectly rational conclusion with twisted pretzel logic, figuring that if a $300 million-a-year tax break didn’t grow the economy, a $1 billion-a-year tax break surely will.
Justice repeatedly uses Tennessee as the exemplar for rolling back West Virginia’s income taxes, citing the case of a typical Tennessean whose income doubled once income taxes were repealed. (This ubiquitous Tennessean also has a high quality of life because, according to Justice, he can go around the corner and there’s Dollywood!)
In reality, according to the Pew Trust’s latest Fiscal 50 report, from 2007 to 2019, personal income in Tennessee grew by an average of 2.2% a year, better than the national average of 2% but not good enough to finish among the top 10 states.
(The state just ahead of Tennessee, Montana had 2.5% growth and has a maximum income tax rate of 6% that kicks in at just $18,400 of income. The state just behind Tennessee, Massachusetts, had 2.1% growth and has a flat 5% income tax rate.)
In fact, eight of the top 10 states for personal income growth in the Pew study have income taxes, and four have maximum rates that exceed West Virginia’s 6.5%.
During one of the town halls, Justice said the high school classmates of his attorneys now all live in “L.A., Denver and North Carolina,” implying that West Virginia’s income tax drove them away. However, all three states have income taxes, a 4.63% flat tax in Colorado, a 5.25% flat tax in North Carolina and the granddaddy of all maximum tax rates, 12.3% in California.
We can conclude that having income taxes does not preclude economic growth, just as being a no tax state does not assure growth. There must be other factors that come into play.
For Justice to use Tennessee as evidence West Virginia should repeal its income tax requires the same level of suspension of disbelief that was needed to believe Arnold Schwarzenegger and Danny DeVito were actually siblings in “Twins.”
Tennessee has a lot of things going for it that West Virginia lacks: Multiple large metropolitan areas; headquarters of Fortune 500 companies, including FedEx and HCA; and a massive tourism industry that includes the home of country music, Graceland, the Great Smoky Mountains and, yes, Dollywood.
There is any number of reasons why Tennessee’s economy is doing better than West Virginia’s (although that is a claim that can also be made by just about any state not named Mississippi).
I have no doubt Justice truly loves the state, and love blinds him to harsh realities. I think he actually believes that if he can tweak the state tax code, tens of thousands of northeasterners will flock to the state, even though it is a place where legislators wear jockstraps on their faces in lieu of masks.
A better comparison would be Kansas, a smaller, mostly rural state that followed the ALEC playbook and slashed its income taxes on the promise of economic boom times only to see itself plunged into a statewide financial crisis.
Asked about the lesson of the Kansas experiment during one of the town halls, Justice revealed a thorough and scholarly understanding of economics of what went wrong in the Sunflower State, responding: “Who in the world wants to go to Kansas, for crying out loud? Are you kidding me? You’re going to have to drive through a cornfield 10,000 miles long to get to Kansas.”
(Clearly, when economist Arthur Laffer promoted the purported trickle-down economics of the Kansas tax cuts, he failed to take into consideration the plan was doomed because the place is surrounded by gargantuan cornfields.)
Before we go blowing up a fourth of our state’s general revenue budget, it would seem that a more thorough and scholarly examination of the implications of doing so is in order, beyond hunches, gut feelings, and bluster about 10,000-mile long cornfields.
It is notable that in a session where the House and Senate ramrodded through a total of 53 bills in the first 15 days of the session — nearly five times what used to be considered normal — a bill of the complexity of Justice’s tax cut plan has yet to surface as the session approaches the one-third mark.
Meanwhile, the virtual town hall format gives Justice even more control over the forum than his rigidly controlled COVID-19 teleconferences, since questions must be submitted in advance, and are subject to screening.
One question I know for a fact has been submitted, but hasn’t been asked or answered on air is: “Governor, if the state income tax rate is cut in half, how much will you personally save each year?”
Finally, Charleston for once got some good news Wednesday, with the announcement that not only is the West Virginia Power joining the independent Atlantic League but team owners are partnering with owners of the rival Lexington Legends.
While the loss of affiliation with Major League Baseball is a blow, there are many positives in the new arrangement.
One is that the team is free to sign players, rather than have them assigned by the parent club. That means the Power can sign players with ties to the state and players with Class AA, AAA and big-league playing experience.
As a single-A affiliated team, the Power roster was perpetually made up of 18- to 22-year-olds, all with little to no more than a couple of years of professional baseball experience.
For the casual fan, the Atlantic League (in normal years) plays a 140-game season, as the South Atlantic League did, but the regular season (normally) starts the last week of April, instead of the first week, and ends the last week in September, not on Labor Day.
That means no games during the chilly, rainy days of April, and a season that stretches to the end of September, one of the nicest weather months in Charleston.
Perhaps the most important factor is affordability. Teams that were invited into the new, contracted 120-team minor leagues will have the proverbial screws put to them by MLB, with demands for expensive improvements to facilities, costly new requirements for game day operations and contracts that require teams to give a bigger share of their ticket sales, concessions and advertising revenue to Major League Baseball.
My hunch is that, in short order, minor league teams will have to compensate by raising their ticket and concessions prices to something closer to Major League levels.
I suspect Power fans will have the last laugh when fans in cities that kept minor league baseball find themselves staring at $20 box seats, $6 hot dogs, and $9 drafts.
Meanwhile, it was interesting that the Kanawha County Commission was not represented at the announcement Wednesday, considering the county kicked in the final $2 million needed to close the deal on building Power Park.
Also, it is notable that in the Power’s announcement press release, team management thanked the governor, Mayor Amy Shuler Goodwin, Sens. Joe Manchin and Shelley Moore Capito and two of the three members of the congressional delegation for their efforts to keep professional baseball in Charleston. Rep. Alex Mooney was conspicuously omitted.
Reason: Mooney didn’t lift a damn finger to help the team. He probably doesn’t even know Charleston has a ballpark.
West Virginia will lose a congressional seat with redistricting. It’s obvious which of the three current representatives is most expendable.