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Editorial: Tax reform package needs more thorough review

From The Herald Dispatch of Huntington:

In the midst of West Virginia’s always chaotic legislative session, lawmakers have decided to have a philosophical debate about tax reform.

Last week the state Senate approved Senate Bill 409, which would basically expand and raise the state’s sales tax and gradually decrease the state income tax.

The proposal still leaves many questions, not the least of which is whether the changes would raise enough money to make reducing the income tax a practical reality. But the larger issue is what would be the impact of the change. Is swapping an income tax for a higher sales tax a good idea?

Opponents contend it would make the Mountain State tax structure more “regressive” – in other words, it would hit poor people and the middle class harder and put more money in the pockets of the state’s more affluent residents. The expansions would also mean new taxes on food and many personal and business services that residents and businesses do not pay sales tax on now.

Proponents say having no income tax would make the state more attractive to new business, workers and retirees. They point to the seven states that have no income tax – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – as all having more attractive economies and business climates than West Virginia. Of course, that is true, because every state in the nation, with the exceptions of Mississippi and Arkansas, has a better economy than West Virginia.

But there is no real evidence that not having a state income is a major factor in those state’s success or lack of it. Florida, Nevada, Washington and New Hampshire (where residents pay income tax only on income from investments) were all in the top 10 for private-sector job growth in 2016. But the other six states in that ranking – Oregon, Utah, Missouri. Georgia, Hawaii and Massachusetts – all have income taxes.

Moreover, on other basic measures of economic health, such as median household income, New Hampshire and Alaska are the only “no income tax” states in the Top 10. All the rest have income taxes.

Is there really a “cause and effect” there?

Moreover, there are so many other factors that affect growth and development in West Virginia, from the health and education of the state’s workforce to broadband access and the lack of ready-to-go business and manufacturing sites. Is the state’s tax structure really where we need to focus our attention?

Unfortunately, with only a couple of weeks left in the legislative session, there is little time to explore those questions. For residents, it would have been helpful if lawmakers had raised this idea a year ago, ask Marshall University and West Virginia University economists to study the question and held public hearings around the state to discuss the pros and cons. And get a better handle on the impact of various possible changes.

With the clock ticking on the session and the looming budget crisis, this tax reform package seems to be a hurried distraction from the real issues facing the state.

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