Non-profit, non-partisan group reacts to latest income tax proposal

CHARLESTON, W.Va. (WSAZ) - The executive director of the West Virginia Center on Budget and Policy says the latest version of Gov. Jim Justice’s plan to repeal the state income tax is “pretty similar to his original proposal.”

The “Justice 4 All” version of the plan was announced Monday evening at a meeting with the governor and lawmakers.

The West Virginia Center on Budget and Policy is a non-partisan, non-profit organization that analyzes these types of issues for the state.

All proposals that have been brought to the table raise other taxes to fill the budget gap that would be created by the repeal of the income tax.

Monday’s proposal by the governor slows the income tax reduction, lowers the tax increases on soft drinks, tobacco and coal.

It does keep the higher sales tax and taxes on professional services like a haircut. Other items that would be included in the consumer sales tax base would be things like computer hardware/software, legal services, accounting services, other professional services, and selected advertising.

Kelly Allen, the group’s executive director, says the plan’s proposed 7.9 percent sales tax would give West Virginia the highest sales tax in the country. In some municipalities, it would be as high as 8.9 percent.

The overall concern is that the plan would be an overall tax increase on the average household in the bottom 60 percent because of new or additional taxes in other areas.

Another concern to the WVCBP: some of the money being used to fill some budget gaps left behind by a repeal would come from one-time stimulus money, which is only a one-time payment.

“They hope that economic growth, new folks moving to the state, businesses opening here people moving to the state will help offset those cuts, but there is no guarantee that is going to happen and we’ve looked at research that shows there’s not really a correlation between migration,” Allen said. “So where people move and income tax, the income tax rate, so we are worried that is essentially a promise that is really hard to keep.”

Nine other states do not have income taxes.

Alaska, according to Allen, has eliminated a broad-based personal income tax because of the state’s ability to tax oil.

The eight other states, she said, that don’t have a personal income tax essentially never had one. So there was no burden to figure out what taxes to levy in order to make up budget shortfalls.

Allen calls the income tax the tax that is the most fair.

“The income tax is also the fastest-growing tax in our state, so it is essentially the most stable. It is growing quickly so it allows us to pay for cost increases in our budget, where things like our severance tax is declining, our sales tax grows a little bit more slowly, so it is a stable and fair tax and it actually offsets regressive taxes in our state sales tax system, so the sales tax is regressive so it falls more heavily on low and middle income families,” she said.

At the time of our interview with Allen, the proposal was not available to read in the form of a bill for analysis.

When asked about what the proposal would mean for potential growth rates, Allen pointed to the West Virginia Senate’s version of House Bill 3300 to put that growth in perspective.

“In order for West Virginia to offset the losses that we would see from these cuts to the income taxes we would need to see growth at about seven and a half percent, currently West Virginia’s growth is about one percent, so we would have to see exponential growth a lot greater than we are seeing right now,” she said.

“In the states with no income taxes, their growth is around 3 percent, so still even if we saw that little bump in economic growth it wouldn’t be enough to offset the major losses that we are seeing,” Allen added.

Allen says her group has not been asked to be a part of the conversation with state leaders.

Allen says last year the WVCBP proposed a plan to modernize the state’s tax brackets -- something she says hasn’t been done since the late 80s. She said the plan, based on current incomes, would actually be an overall tax cut for 95 percent of West Virginians. It would raise taxes on the wealthiest.

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