West Virginia Gov. Jim Justice reminded lawmakers and residents in his State of the State address this week that he “hates raising taxes.”
But his proposal to fill a projected $500 million hole in the 2017-18 budget includes what some are calling the largest tax increase in state history.
The new governor insists that further cuts to state government would be catastrophic.
“Are you willing to eliminate all of our state parks? Are you willing to close all our colleges and universities except for Marshall and WVU?” he noted as examples of the potential cuts lawmakers might face.
But Republican leaders, who hold a majority in both the state House and Senate, made it clear that the large package of increases would receive a cool reception. Senate Majority Leader Mitch Carmichael, R-Jackson, told the Charleston Gazette-Mail he was “incredibly disappointed” in Justice’s plan and called tax increases the same “tired, worn out approach.”
Beyond political ideology, the tricky part for West Virginia is that either course has the potential to reduce employment, which is arguably the biggest problem the state faces.
Deep cuts to government means job losses for state employees, some of whom may leave the state to find other work. Too many new taxes could lead to reduced spending by consumers, lower profits for business and ultimately job losses.
Small business, which makes up such an important part of employment in the state, could get hit coming and going on these proposed increases. The idea of eliminating the sales tax exemption for professional services, which would add $87 million in revenue, is a good example.
While this could mean that consumers would now pay sales tax on services such as haircuts and day care, businesses would feel even more of a pinch. That would add taxes for everything from legal and accounting services to contracting, repairs and advertising – all necessary parts of running their business. Moreover, many of our small businesses are “services,” and their clients would view the tax on their service as a price increase.
For years, lawmakers have talked about the importance of analyzing the economic impact of the decisions. This year, they really have their work cut out for them. Whatever the mix of taxes and cuts, we need to preserve every job we can.