By ANDREA LANNOM
The Register-Herald
CHARLESTON, W.Va. — The budget deficit and proposals to eliminate the state income tax were among the main topics at the West Virginia Center for Budget and Policy’s fourth annual Budget Breakfast last week.
Last week, Republican lawmakers introduced Senate Bill 335, which would repeal consumer sales, service and use taxes and would phase out and repeal corporate net income and personal income taxes. The bill would replace income tax with a consumption tax.
Ted Boettner, executive director of the center, said in his view, eliminating the personal income tax is not a good idea. He said the richest 20 percent would see a tax cut, while lower and middle income workers would have a tax increase.
“If you’re wealthy, you tend to save a lot of your income,” Boettner said. “The top 1 percent only spends about 50 percent of their income. Lower income workers spend more than their income because they borrow or are on SNAP, or things like that. They spend way more than they make. If you’re saving it, there is no guarantee it will make its way back to West Virginia. It could be in another state or an IRA.”
Boettner said increasing the consumption tax would give West Virginia the highest grocery tax in the nation at 8 percent.
Boettner said he thinks a better approach would be to have a sugary beverage tax of at least 1 cent, which he said would raise $88 million. He also said raising the tobacco tax to $1.50 a pack would help.
“These are the biggest problems facing West Virginia. We have an unhealthy population. … It’s driving our costs in Medicaid and insurance,” he said.
He said what also may help is increasing the oil and natural gas tax, saying Ohio and Pennsylvania have proposed something similar.
He also unveiled a budget calculator as part of Protect West Virginia, a coalition of citizens and organizations created in the wake of the budget crisis. People can use this calculator, found at protectwv.org, to balance the budget themselves.
The event also hosted a budget panel with Sen. Mike Hall, R-Putnam; Delegate Matthew Rohrbach, R-Cabell; and Nick Casey, Gov. Jim Justice’s chief of staff.
Hall said he could see a few of the governor’s initiatives gaining traction in the Senate, mentioning specifically Justice’s infrastructure plan and raising the gas tax and DMV fees. However, he added the caveat that traction will come only if they are tied to the road bond proposal.
“It’s easy to pass taxes if you put a proviso that it can only be levied on folks of the state if they vote for the road bond proposal that the governor proposed,” Hall said. “I don’t see them passing it in absence of that. The assumption is anyway that taxes are to support that. I believe you could get those through with that condition.”
Rohrbach said there has to be a happy medium. He said he shares the governor’s concerns that roads need support.
“We’ve not done a good job maintaining what we have,” Rohrbach said. “The road budget is the same as 10 years ago and with inflation, we’ve lost 40 percent of our purchasing power. We have to find a way to get more money for the roads.”
He said it all hinges on the road bond. He said he wouldn’t see it working if a consumption tax is increased and then the road bond goes before the people, saying he doesn’t think it would stand a chance in that case.
Casey talked about Justice’s Save Our State (or SOS) budget, which proposes $26.6 million in cuts and $450.15 million in taxes to close the nearly $500 million gap.
Justice also presented an alternative budget which would cut funding for many programs, agencies and universities.
Casey said when budget officials cut $606 million off the current budget and presented that to the governor, Justice did not like what he saw that was left of the state.
“At the end of each session, we know what we saw in the end and that was not West Virginia,” Casey said.
“What do you do when you pledge not to raise taxes when you’re a candidate? You wake up and smell the coffee. You see what’s left when you cut. … What the governor is proposing is simple. Keep the patient alive,” Casey later said.
Casey said raising the sales tax to 6.5 percent, increasing the DMV fees and bonding for infrastructure are what will help the state on its “rocket ride” into prosperity.
“We thought our bond would be $2.4 million,” Casey said. “Well, Moody’s downgraded and it’s lower now. Let’s bond what we can. That’s the rocket ride.”
Earlier this week, Moody’s Investors Services announced it downgraded the state’s general obligation debt rating from Aa1 to Aa2, affecting about $393.6 million in outstanding debt.
Boettner mentioned that having an earned income tax credit would help the state as well. Rohrbach said he supports having such a tax credit.
“I support it because it’s the right thing to do,” he said. “We need to help people at the lower end. … I’m hopeful if some of the tax increases pass that we stand a chance this time to get a low-income tax credit. This will get people in the bottom 40 percent back to Eden. I think it stands a good chance of passing.”
Hall said he likes the tax credit but added that it could hit a road block with the fiscal note. Hall said he didn’t know if he could fit in the tax credit this year in the next 40 days if the budget has to balance.
“Let me tell you the situation I’m in,” Hall said. “I have a bill revenue estimate and whatever the Senate does has to affect the revenue estimate when you do a budget document. We have 60 days to get to that number. As much as I like an earned income tax credit, it has a fiscal note of $60-$100 million in costs. It will lower that revenue estimate of $60-$100 million. Then, I have more problems. You can look on Ted’s calculator and see that.”
When asked about the income tax, Casey said the no income tax pledge is really not a no income tax pledge. Justice said in his State of the State that he would like West Virginia to become the eighth state to do without it.
“We would like to see the income tax go off. Other states have demonstrated when you get the income tax off, there is measurable economic value,” Casey said, citing Tennessee as an example. “The reality of the bill is personal income tax that comes in, if you replace it tomorrow, you have to replace it with something. I don’t think that’s a possibility at this time. We believe it should be studied. It’s the goal of the governor to study. I don’t think it’s rational to put in place now.”
Rohrbach said in his view, there is not much of an appetite in the House to take it off.
“It sounds appealing, but Tennessee got to where it got for a lot of reasons,” Rohrbach said. “One of them is they have a lot of flat land, which we were not blessed with. If we go that direction, it has to be slow. To think that we can develop a bill that will, poof, you wake up on the first of July and there not be personal income? I don’t see an appetite for that in the House.”
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