When Republicans announce their faith in a plan to stimulate the economy, it is wise to tighten the grip on one’s wallet.
Presently, West Virginia’s GOP governor and the party’s legislative supermajority tell us that eliminating our personal income tax will cause 400,000 people in other states to drop what they’re doing and make tracks for West Virginia.
Thus, the heavens will open and our state’s foundering economy will be transformed. All you have to do is cover the resulting 43% hole in state revenue.
To close that gap, Gov. Jim Justice has fixed his eye mainly on upping the sales tax and adding taxes on some professional services. A wealth tax is a possibility, too. But before launching this ship, one might ask whether it will float.
For answers, we might turn to the Sunflower State of Kansas, which is familiar with the disaster that West Virginia’s leaders now embrace. In 2012, Republican Gov. Sam Brownback promised the huge tax cuts would be “a shot of adrenalin into the heart of the Kansas economy.”
Instead, Kansas suffered a financial coronary. In the first year, Kansas’ revenue was down $700 million. Both Moody’s and Standard and Poor’s downgraded the state’s bond rating, which drove up the cost of building projects.
By the second year, a number of Kansas school districts, unable to meet payroll, had to end the school year early. In year three, Kansas had to make drastic cuts to police, fire and other services. While job growth in the United States was up 8.4%, in Kansas, it lagged at 3.3%.
By year five, the Kansas budget gap was $900 million and the legislature reversed most of the tax cuts. As Forbes magazine put it in a headline, “The great Kansas tax cut experiment crashes and burns.”
More answers are found if we look closely at 18 other states, nine with the highest personal income tax and nine with none at all. From 2009 to 2019, the gross domestic product in the states with the highest personal income taxes increased far more than it did in the nine states with none, as revealed in research by the West Virginia Center on Budget & Policy.
Unemployment was lower, and annual income increased more, in the states that had a high personal income tax, as well. Sadly, such realities long have eluded the attention of folks who nevertheless go on believing we can tax-cut our way to prosperity.
Are there any winners if Republicans unleash the no-income-tax monster on us? Yes, the top 20% of our earners, those making $89,000 and up, will receive 70% of the benefits.
Yet, Justice promises, “This is an opportunity beyond all comparison.” That sounds a lot like Brownback’s prediction in 2012.
While tax cuts are unlikely to motivate 400,000 individuals to move here, we do understand that people prefer to live where there are good public services, good schools and progressive policies concerning equality and the environment. People also look for locales where they can anticipate earning a living wage without suffering the woes of the Right-to-Work and Paycheck Protection laws that mainly serve to bust unions and suppress wages.
And people want to live where members of the legislature are not known for suggesting they would drown their own children for being gay and did not routinely denigrate Muslims and did not mindlessly storm the U.S. Capitol.