There are three — three! — state income tax repeal proposals in Charleston right now, all of them vastly different, and only four days left in the Legislature’s regular session.
HB 3300 might be the most extreme. It keeps Gov. Justice’s originally proposed cuts, but slows their implementation, spreading out the income tax decrease over many years. However, it doesn’t raise any taxes, instead banking on theoretical economic growth and flat state budgets to fill the hole.
The Senate bill — a strike-through version of HB 3300 — and the governor’s latest proposal, called “Justice 4 All,” leans heavily on greater flat taxes to make up lost revenue. This includes increasing the state sales tax, a possible food sales tax, taxing professional services and higher sin taxes on cigarettes, tobacco products and vape liquids. The Senate version is also highly dependent on the legalization of marijuana. But all three bills fall short of recouping the revenue that would be lost to the income tax elimination.
In all this talk about cutting the tax, though, no one has really said what West Virginia’s income tax actually is. According to the Tax Foundation, the tax brackets break down like this: 3% for income less than $10,000, 4% for $10,000 to $25,000; 4.5% for $25,000 to $40,000; 6% for $40,000 to $60,000; and 6.5% for income above $60,000. The median income in West Virginia (the most middle-of-the-road metric) is about $49,000, while Monongalia County’s is about $57,000, according to the Census Bureau’s 2019 American Community Survey. In other words, more than half of West Virginians fall outside the top tax bracket.
This means the elimination of the income tax benefits the top earners more than anyone else, while increased flat taxes shifts the tax burden to lower income people. Senate President Craig Blair, R-Berkeley, made the point people pay no attention to a sales tax when they’re shopping, and travelers carry a share of the burden, while an income tax falls exclusively on workers. But that’s not entirely true.
It’s not that people pay no attention to sales tax — it’s that we know there’s no way to avoid it, and we all brace ourselves at the cash register (or the online checkout) for a sudden jump in final cost. Travelers may carry some of the sales tax burden — but they’ll only get hit with the sticker shock a handful of times as they pass through. Residents of West Virginia, on the other hand, will get walloped every single time they go to the store.
The other advantage of the income tax is that it draws from people who live out of state but work in West Virginia. That means all the people who live in border towns across state lines but still use our infrastructure and other tax-funded amenities are also contributing to West Virginia’s revenue. But their income tax will be cut too, and, chances are, the money those commuters save will stay in their home state.
The legislative session ends Saturday, so unless a special session is called, which costs more taxpayer dollars, any bill that’s going to pass must do so before end of day Saturday. A major tax overhaul is not something that should be pushed through in the last four days of the session — especially when there are three vastly different bills on the table. Justice and the legislators need to slow down.
Instead, lawmakers need to set aside the state income tax repeal for now. It can be introduced again next session, once more tax experts and economists have had time to thoroughly study the proposals and their consequences.
Justice insists the tax repeal has to happen right this second, but it really doesn’t, because passing this haphazard — not to mention controversial and unpopular — tax repeal now could send West Virginia head-first into financial ruin.
