This editorial originally appeared in The Herald-Dispatch of Huntington.
The West Virginia Legislature’s supermajority of Republicans has revived the idea of phasing out the state’s personal income tax. With the regular session beginning this week, the idea is likely to be included in one or more pieces of legislation. This is territory where things must move slowly and where impartial analysis is vital.
“There is no way you can take $2.1 billion of personal income tax and eliminate it in one year,” new state Senate President Craig Blair, R-Berkeley, said last week.
He cited the amount of revenue the tax — the largest component of the state’s $4.7 billion general revenue budget — brings in each year.
How would the Legislature fill a hole that large in the state budget? By raising the sales tax from the present rate of 6% to perhaps 8%, 10% or more? That could work in interior counties, but it would give people in border counties good reason to cross the state line to spend their money.
By a huge increase in property taxes? That would be a tough sell, and it would give people in border counties another reason to move across state lines.
Or, as a more extreme measure, reduce or eliminate state subsidies for Marshall University and West Virginia University?
It comes down to legislators deciding which increases their constituents will accept as the price for eliminating the income tax.
Legislators must tread carefully here and consider the trickle-down effects of increasing either of these taxes. How would they affect the ability of counties, municipalities or boards of education to ask voters for revenue increases for local needs?
Blair said one way of achieving revenue neutrality is “finding efficiencies in state government.” How much efficiency is out there to find, and how long will cutbacks last before public demand for new programs or unforeseen circumstances force another upsizing of state government?
Politically speaking, many people see an income tax as instrument of fairness. The more you earn, the more you pay. It affects people with higher incomes more than people with lower incomes. Sales taxes affect lower-income people more, so replacing part of the income tax with an increase in the sales tax will be seen as economic warfare on poor people.
No doubt, the GOP caucus discussed this idea at length in private before announcing it last week. The taxpaying public expects the Senate and House leadership to share the numbers and the timetables that were used in their discussion. Yet, comments by Blair and others indicate there is no firm proposal ready.
The supermajority will be around next year, too. They should take this slowly, so facts can be presented and a consensus built before the Legislature makes a mistake from which it could take a generation to recover.