Monday, Gov. Justice had the first of his virtual town halls to sell West Virginians on the elimination of the state personal income tax, which makes up nearly half of the state’s tax revenue. And like most sales pitches, there was a lot of glitz and glam (“If we can accomplish this it will be absolutely the greatest thing you can ever imagine”), vague assertions of awesomeness (“a tremendous amount of people that will come and bring goodness to this state”), the old “If we don’t do this we will regret it forever” line and yet very little tangible evidence to back up any of his claims.
Which isn’t so much of a concern when it’s a commercial trying to sell a new exercise machine, but is definitely a problem when it’s a governor trying to sell tax reform.
Justice wants to start by cutting income taxes in half for most West Virginians, except for the richest, who will only have their income taxes cut by a third. But then he doesn’t give any specific numbers. Who is considered “the richest”? Individuals making over $150,000 a year or over $500,000 a year or over $1 million a year? We don’t know, because Justice won’t say.
Then there’s his variety of proposals for recouping the lost tax revenue. The biggest problem here is he’s throwing out spitballed ideas instead of plans. We know West Virginia will lose $2.6 billion if the income tax is reduced; but Justice hasn’t provided quantifiable evidence of where that revenue will be made up. If he wants to sell us on this tax cut, he’d better start producing some numbers. The only number he has produced is this one, “if lowering the income tax increases the state population by 20% …” and we’d like to know where he got it.
He proposed an increase in sales tax by 1.5%, tiering the oil and gas severance tax, increase taxes on cigarettes and soda, taxing professional services and instituting a wealth tax. But what does that actually mean, for revenue and for taxpayers?
How much revenue will an increased sales tax bring in? And how will it affect places with municipal sales taxes? Currently, West Virginia has 68 municipalities with an additional 1% sales tax, including Morgantown and Kingwood. Under Justice’s proposal, those areas would now see an 8.5% sales tax.
Oil and gas severance taxes don’t seem to be a particularly large nor reliable source of income for the state. According to the West Virginia treasurer’s website, severance taxes received July 1, 2019 to June 30, 2020, and redistributed back to the counties, totaled about $11.8 million. And a WVNews article from Jan. 13, 2020, (pre-pandemic) reported that severance taxes were much lower than expected and caused a $33 million shortfall in state revenue.
Justice wants to increase taxes on cigarettes and sodas but not alcohol, which doesn’t produce enough gross tax revenue. According to America’s Health Rankings, 13.2% of West Virginia adults reported excessive alcohol consumption in 2019, with the trendline going up; 23.8% of adults reported smoking regularly in 2019, but that trendline is going down. Alcohol is only subject to the sales tax, while cigarettes are subject to an additional $1.20 tax per pack and other tobacco products to an additional 12% tax. So if there’s going to be more drinkers and fewer smokers, taxing alcohol might be a good idea.
We’re still confused about what this “wealth tax” would actually apply to, and what the heck are these “professional services” Justice suddenly wants to tax?
If the governor is going to sell us on his income tax cut, he needs to stop with the hyperbole and start offering up numbers. Justice’s next virtual town hall is 7 p.m. tonight, so maybe we’ll finally get some answers.
