When you’re in a race with Mississippi to do something, you probably should heed the advice given to Jim Ignatowski and slow down.
During one of his virtual town hall meetings on his tax shift plan, Gov. Jim Justice pointed out that the Magnolia State also is working on a personal income tax repeal plan, and that they’re ahead of us, with their bill having already cleared one house in their legislature.
While West Virginia and Mississippi have a common bond in that we frequently vie with one another to avoid being the 50th ranked state in various categories, the two states are hardly identical.
Mississippi has a general revenue budget of $5.97 billion, of which $1.9 billion comes from income taxes. That’s about 32% of the total.
West Virginia’s general revenue budget is $4.57 billion, of which $2.1 billion is income taxes. That’s 46%.
While neither cut is easy, replacing a one-third revenue cut is clearly less arduous than replacing nearly half the revenue pie.
I’m not a poker player, but I think I’d surely like to play Justice because he has so many “tells.” He tends to be brutally honest at the most inopportune times. As when he admitted two weeks ago that corporate tax cuts, right-to-work and repeal of prevailing wage had failed to deliver promised economic growth.
(Last week, he walked that back, saying they’re not failures but are “spokes in the wheel.”)
Then, during a virtual town hall last week, Justice said his tax cut plan will be measured and phased in, unlike what he called the abrupt and aggressive income tax reduction plan that Mississippi is advancing, a cut that would require increasing the state’s sales tax to 9.5%.
“The burden of that on the poor people would be enormous,” Justice said in a typical display of frankness.
Two days later, he unveiled his proposal, which would raise the state sales tax to 7.9%, or up to 8.9% in those cities (including Charleston) that have a full 1% municipal sales tax.
Justice’s plan would require by far the largest tax hike in state history — Gov. Gaston Caperton’s $289 million tax increase to bail the state out of an Arch Moore-induced bankruptcy in 1989 would amount to $609 million in today’s dollars.
That includes making our taxes on beer, wine and liquor the highest or among the highest in the nation, an odd choice for a governor who desires to grow the state’s tourism industry to world-class status.
Justice also had the audacity to suggest that eliminating sales tax exemptions for a variety of professional services to raise $180 million a year would not hurt West Virginians, since he surmised that law firms will “eat” the 8.9% expense.
Now, I’m not a world-famous economist (although, as we’ve established here, I aspire to be), but to me, cutting one tax by $1.07 billion while raising myriad other taxes by $900 million-plus a year is not so much a tax break as a tax shift — a tax shift from a select group of well-to-do West Virginians to vast numbers of low- and middle-income families.
Not only that, it would blow a $185 million hole in the state budget, necessitating further cuts to state programs and services that those low- and middle-income families rely on.
Justice, who unlike his BFF, former President Donald Trump, has some sense of empathy, recognizes the hurt his plan would inflict on those families, and has proposed having the state write $52 million of checks to those individuals to make them whole.
My impression is that the whole thing will be DOA in the Legislature.
The bill has a lot of opponents, including the powerful tobacco, soft drink, and beer, wine and liquor lobbies.
(Justice even managed to alienate Friends of Coal with proposed tax hikes on coal and natural gas, although the plan would require coal to rise Phoenix-like from its deathbed for the tax hikes to kick in.)
To get his bill passed, Justice will have to make like the scene from the Bruce Lee movie, where Lee single-handedly fights an entire dojo — except Big Jim ain’t no Bruce Lee.
During his tenure as governor, Justice and his minions have displayed an almost complete lack of aptitude when it comes to working bills through the Legislature.
Odd that a billionaire businessman would not be good at deal-making and horse-trading, but I suspect that in the business world, Justice has always negotiated from a position of power, whereas at the Capitol, the governor and the Legislature are co-equal parties.
At the very least, perhaps Big Jim’s big thinking will spur a thorough review of our Tax Code, with an eye toward creating a more equitable, progressive tax system. (In my brief tenure here, there have been at least two tax studies conducted, but nothing much came of either.)
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If you’ll humor me for a moment, speaking of Mississippi, I’d like to offer a personal reflection.
As part of my rail journeys, sometimes I’ll pick a city where I’ve never been and I’ll stop over there. A couple of years ago, when I was riding the City of New Orleans, I opted for Jackson, in part to be able to check off another state Capitol.
To my delight, I found Mississippi to be like West Virginia without the hills. People speak with twangs, not drawls, and like West Virginians, are generally friendly while still being a bit leery of outsiders.
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It was disappointing to learn that Justice has settled the lawsuit challenging his failure to comply with the constitutional mandate that the governor reside at the seat of government, and has agreed to reside in Charleston.
(The state Supreme Court had sealed Justice’s fate in November, when it ruled that the Constitution’s “shall reside” language is not discretionary.)
Unfortunately, that puts an end to discovery, which means we’ll likely never learn why Justice has refused to live in Charleston until now, how much taxpayers spend for his state police-escorted commutes to and from Lewisburg and other insights about the governor.
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One of the most astonishing things about recent elections is how Republicans have been able to convince large numbers of voters of the farcical claim they are the party of the working class, even as they consistently push anti-worker policies.
The Legislature has a plethora of anti-worker bills on its plate this session, but I’ll limit my focus here to one: The governor’s bill that would make it easier to classify workers as independent contractors (SB 272), a bill that critics say will cause tens of thousands of employees of state businesses to lose access to a number of employee benefits, including the ability to claim unemployment or workers’ compensation if laid off or injured on the job, or to accrue employer contributions for Social Security and company pension plans, if applicable.
While there’s no fiscal note for the bill — despite claims of transparency, leadership has been playing particularly fast and loose with the rules this session — I was referred to a fiscal note for identical legislation currently under consideration in the Missouri General Assembly.
I say identical, because the Worker Classification Act is one of those American Legislative Exchange Council (ALEC) cut-and-paste bills popular with right-leaning legislators across the U.S.
The Missouri fiscal note, dated March 3, raises concerns that passage of the act would knock definitions in state law for employees and for independent contractors out of conformity with the federal Unemployment Tax Act, a law that requires employers to collect a payroll tax to underwrite unemployment insurance.
(That tax rate is 6%, but most employers qualify for tax credits to offset up to 5.4% of that amount.)
The note warns that if the General Assembly monkeys around with the definitions for employee and independent contractor and ends up knocking state law out of conformity with definitions in federal law, the state is liable to lose:
- $37.5 million a year in federal funding for the state unemployment insurance program.
- $11.5 million a year for job retraining programs under the federal Wagner-Peyser Act for reemployment services.
Also, according to the note, if the Feds rule that the state law is out of conformity with federal law, they could wipe out the unemployment insurance tax credits statewide, requiring employers to pay the full 6% tax at a total cost of $1.08 billion a year. Ouch.
Missouri has three times the population of West Virginia, but you can ballpark those figures for our state.
The West Virginia version passed the Senate on Feb. 19 on a mostly party line 21-13 vote (Two Rs joined the Ds to oppose).
It’s currently on the House inactive calendar, primarily over concerns regarding a pending amendment that would remove a provision in the bill exempting independent contractors from equal employment opportunity protections in the state Human Rights Act. (Which is a story for another day.)