No sooner did the 2022 midterm elections conclude than politicians on all levels moved to early posturing for the 2024 races.
Gov. Jim Justice’s State of the State speech was as much a kick-off of his next campaign as was his rose-colored-glasses reflection on the current state of West Virginia. And his proposal to cut the state’s income tax by half is nothing more than a gambit to woo West Virginia voters while obscuring the real effect of cutting revenue for our roads, schools, hospitals and public safety.
Cutting the state’s income tax by 50% (and thereby cutting revenue by about 25%) is not a good deal for West Virginia, particularly for working-class people who already are struggling with affordable access to health care and education. Permanent tax breaks paid for by a temporary budget surplus can only result in one thing: cuts to programs and services that West Virginians depend on.
While there’s a lot of focus on the current state surplus, most of that surplus was generated by two main factors: lowball revenue estimates and bigger-than-predicted severance tax collection that has resulted from high demand and high price for energy.
Over the past year, natural gas prices have risen more than 130%. At the same time, Justice seems to have intentionally underestimated his annual revenue projections for several years now, acting surprised to see more coming in than he predicted. These revenue increases from energy prices are not sustainable, and any budget surplus that depends on that is bound to hit hard times in the next bust cycle.
It’s also not sustainable to keep producing “flat” budgets, which ignore rising inflation, the aging of the population, the continuing opioid crisis and the rising cost of consumer goods. Instead, lawmakers should be ending tax breaks for wealthier households and corporations, require them to pay their fair share, like the rest of us, and invest in improving the economy so that everyone can benefit from the boom.
As revenue from gas and coal over the past couple years generated more revenue than the state expected, for the people living in the six counties with highest production, not much has changed in a decade. Poverty rates remain high and these counties are losing more population while the out-of-state corporations extracting the fuel see boost after boost in profits.
The governor’s income tax cut proposal flew through the House of Delegates in the early days of this legislative session only to be declared dead on arrival by Senate leaders. They are still holding out for the elimination of our business inventory and equipment tax (shot down by voters in November) and are hinting at a “rebate” similar to that suggested by the governor during his anti-Amendment 2 campaign last year. The hazards of either one are the same. Giving tax breaks to big, out-of-state business will not trickle down prosperity onto working families struggling to make ends meet.
Over the past several years, the rich have gotten richer and price-gouging corporations have enjoyed enormous tax discounts under the Donald Trump tax law while enriching their wealthy shareholders at our expense. Rather than pay taxes based on their income, like the rest of us, millionaires and billionaires pay lower tax rates than firefighters and teachers. The last thing we need is to make the system even more unfair by eliminating or cutting income or business inventory and equipment taxes.
The governor is doubling down on his income tax cut proposal by announcing a series of town hall meetings around the state this week. Watch for more of the same message of a “tsunami” of good coming from this drastic proposal.
The tsunami that Justice is predicting will, in reality, be one of cuts to state programs and basic services we’ve all come to depend on. His dream of new residents flocking to the Mountain State won’t materialize if we don’t have basic quality-of-life services to offer them, like good roads and outdoor spaces, quality education, health care services, public safety officers, etc.
Increasing state workers’ wages is long overdue and a great idea, and the governor should absolutely follow through. But we also need to do more to help the rest of the workforce prosper and to make future workers more competitive through education, paid leave and job training. We can’t do that with less revenue.
West Virginia has tried cutting taxes before, to improve the economy. This “trickle down” strategy hasn’t worked and, instead, made things worse. More tax breaks for the rich and corporations don’t help the rest of us, don’t stimulate economic growth or competition in the long run and don’t leave average people better off.
All evidence points to the contrary: West Virginia lost more jobs and had lower wages between 2009 and 2020 than most other states. We were slower to recover from COVID, as well. Although federal relief bills poured millions of dollars more into our state for unemployment, health care coverage through Medicaid, new jobs and other recovery policies, that funding is not permanent. Retaining at least some of the new benefits will require the wealthy and corporations to pay more, not less, in income taxes.
West Virginia faces many challenges from low labor force participation, hunger, homelessness and high utility and housing costs. The best use of any surplus is to start putting in place long-term solutions through reasonable investments and to reform the tax system so that it’s more fair and everyone pays what they owe.
Cutting income and business taxes will benefit those who already have the most while doing nothing to make permanent improvements to the economy that could draw new residents from outside our borders.