If West Virginia were a hotel, our governor’s proposal to cut the room rate (personal income tax) in hopes of attracting more customers to whom he could sell more trinkets (massages, golf fees, gifts and the like) and end up with more money (because consumers’ sales tax would increase) and have more customers (people moving into the state) would be a bad move.
Why? It won’t happen.
It won’t attract more people, because people don’t move because of lower taxes. Better to deal with facts. The U.S. Census Bureau and the Bureau of Labor Statistics’ annual Current Population Survey, released in December, found as much.
The Gazette-Mail’s Phil Kabler reported that 82% of those surveyed in the United States who moved did so within the same state, leaving only 18% who moved to a different state or country. That’s 5,360,400 people out of more than 300 million living in the United States.
The governor and Senate president are proposing that 400,000 will move to West Virginia over the next 10 years, if only we eliminate the personal income tax. However, I know of no data supporting this assertion.
Now, of those moving out of state, only half moved to a different region. So, our total pool is about 2,680,200 who might be open to moving to West Virginia.
We can ignore the 1,137,000 immigrants from abroad, as very few come to West Virginia. In 2018, only 27,605 foreign-born immigrants lived here, making up 2% of our population.
So, why did the U.S. nationals move? According to that survey, housing was the biggest reason for 40% of the movers. Family reasons were the second-largest motive, at 25%, and employment-related reasons were third, at 20%.
Only 7% of those moving cited retirement as a reason. It is unknown how many relocated to save on state personal income taxes, but there were not enough responses to register as a category.
So, can we, as some suggest, attract 40,000 out of this group every year for the next 10 years, or 400,000 in total, by eliminating the personal income tax?
I don’t see it. Not only is our state losing population, but our entire region is doing so. From July 2019 to July 2020, West Virginia had a net loss of 7,073 people. During that period, Kentucky had a net negative migration of 1,541, Virginia was down 9,136, Ohio lost 12,915 and Pennsylvania had an outflow of 19,588.
Oh, yes. There’s also this pandemic going on.
Gratefully, our outlook on the economy is better than before, but that still didn’t mean The Greenbrier resort would be wise to drop its room rate 60% to compete with nearby budget hotels. That would be tarnishing its brand to reach more customers. Again, there is no evidence that cutting the rate would draw more people into the hotel. It’s conjecture.
There are so many opportunities for this to go wrong. They could end up drawing less-prosperous customers into the hotel who don’t buy as many ancillary services as today’s guests. Or what if the new, less-affluent customers turn the grand destination hotel into a place to stay only when heading somewhere else?
Why mess with our price policy during uncertainty?
Besides, The Greenbrier would be wiser to embellish its brand by bringing special destination events to the hotel (NFL training camps, golf tournaments, car shows, tennis tournaments and more) and keep the rates high.
Wait. That’s what the governor did with The Greenbrier. Wonder why he’d do differently with the state?
Should the governor and Legislature really want to eliminate the personal income tax and be certain it would work, then they should institute some of the proposed tax increases first. See what the taxes bring in before reducing the personal income tax. Then, they can reduce the personal income tax by that amount, and then continue to stair-step the personal income tax down until it’s gone.
That way, we won’t end up like Kansas, which is no way to run a hotel.