For most West Virginians, even if the state income tax is repealed, their taxes are destined to increase without providing any benefits. In essence, services will decline and living costs will go up.
At the state level, under the governor’s income tax repeal plan, the sales tax will take a massive jump and increased taxes on tobacco, beer and soda pop will also be enacted.
Many support these “sin” taxes because of the state’s need for revenue to replace the income tax on those who have the most. There’s also a notion that people who spend their money so foolishly deserve the punishment of higher taxes.
However, sales and sin taxes violate certain basic economic principles.
First, the new taxes will not generate enough dependable revenue to provide what is needed for essential services. Second, these services should not be tied to increased consumption of beer, cigarettes, soda pop, food and necessary consumer goods since they would be largely on the backs of those who are already teetering on the brink of survival.
To make matters worse, there will soon be a new tax coming called inflation.
Climate change has stunted grains and soybeans. Experts say the upcoming price increases will affect bread, margarine, cooking oils and meat. By next year, a family’s food bill will be up 6 to 10%, according to some estimates. Since lower-income families spend 20 to 30% of their income on food, as opposed to only 10% for higher income families, they will be hurt the most. Simultaneously, companies that produce basic consumer goods like bathroom tissue and cereal, are already planning to substantially raise prices.
According to the Wall Street Journal, firms like Kimberly-Clark and General Mills will implement major price hikes by June.
J.M. Smucker has already raised peanut butter prices.
The shift in revenues proposed by the state politicians plus the inflation tax on food and essential consumer goods are similar in one clear way: they are all regressive when compared to income or wealth. This means that lower-income people who use most or all of their income for the taxed goods will pay a higher percentage of their income for those taxes
The trend is clear: the state government is moving away from progressive taxation, where those who get the most out of the economic system are taxed the most.
Revenue sources that are based on special privilege, ownership of key resources, or the ability to get rich from our economic system are not being talked about at all. Even conservative economist Milton Friedman noted that “we have a system that increasingly taxes work and subsidizes non-work.”
Examples would include taxes on resources, such as an excess acreage tax, inheritance taxes, public water usage tax and a minimum corporate tax. In that regard, the New York Times recently reported that 55 of America’s largest companies, including FedEx, Duke Energy and Nike, paid no taxes last year on billions of dollars in profits and dozens of Fortune 500 firms received tax rebates.
Of course, one cannot expect that those who use, have, or are beholden to wealth in order to have political power will tax themselves or their supporters. Furthermore, the players on top like to reinforce the impression that those who have the largest portion of the economic pie are brilliant and deserve economic incentives.
Those at the top also tend to view those on the bottom as having “sinful vices.”
Thus, those on the bottom become vulnerable taxable targets because their vices supposedly need correction and because they are divided, powerless and are forced to spend all of their money on basic goods.
But, in fact, there is nothing more sinister than to slip taxes onto the price of goods that low income families cannot do without.
To push forward a serious public discussion of tax justice in West Virginia, one could suggest that everyone should restrain during the next fiscal year from food, alcohol, cigarettes and soft drinks.
With healthier bodies and clearer minds — but no tax revenue — politicians would then be forced to take an enlightened look at how to tax properly and fairly the wealthy and the state’s wealth in order to create the quality of life all West Virginians deserve.