The hits keep coming for two plans aimed at repealing the state income tax in West Virginia.
Gov. Jim Justice continues to back his plan to cut the tax by 60% next year, and then repeal it entirely. That plan has hit all kinds of resistance among legislators and business organizations, such as the West Virginia Chamber of Commerce and Business and Industry Council, mainly because Justice would offset the eventual $2.1 billion in lost revenue with a 32% increase in the state sales tax, along with other tax increases and removing tax exemptions for some professional services.
The Republican supermajority in the House of Delegates and state Senate seem unlikely to embrace a plan with so many tax increases, despite Justice’s continued lobbying.
Meanwhile, a bill in the House to phase the income tax out over a 12-year period passed Monday and heads to the Senate. It also carries some serious concerns.
House Bill 3300 would reduce the income tax by about $150 million each year, without raising any other taxes, which likely means massive budget cuts. A fiscal note from the Lottery Commission warns that the legislation would divert $164 million a year in state lottery profits — money used to pay off state bond issues and fund senior citizen tax credits. The Promise scholarship, which allows thousands of West Virginia high school graduates to attend college, also is funded with that money.
The governor and the Legislature need to seriously ask themselves if the ends justify the means. Justice’s plan would merely shift the tax burden around, providing hefty relief for the state’s wealthiest residents, who can more easily absorb a higher sales tax. Middle-income and poorer West Virginians would see the gains in their paychecks wiped out by higher taxes. The tax increases in Justice’s plan don’t fully make up for the loss in revenue, either, meaning cuts to services and state agencies are likely.
Those cuts are virtually guaranteed in HB 3300. The Legislature wants to offer the promise of lower income taxes without the inconvenience of replacing that revenue with new taxes or increasing others.
In a state where the economy is already distressed, the House plan likely would hurt the state’s bond rating while affecting senior citizens and further impeding access to higher education. In a state with one of the oldest populations in the country by average age, and the lowest percentage of residents with a college degree, HB 3300 would further shift things in the wrong direction.
The argument from the governor and legislators is that reducing and eventually eradicating the state income tax will grow West Virginia’s population, but, as has been explained before, that doesn’t seem very likely, based on U.S. Census data and surveys.
It certainly would help the wealthy become and remain wealthier, which is perhaps closer to the true goal. But even the wealthy need to ask themselves if this is worth continued worsening economic, educational and quality-of-life conditions for everyone who isn’t them.