Supreme Court Upholds Obamacare Subsidies for 25,000 West Virginians

The Supreme Court upheld a key provision of the Affordable Care Act today, protecting subsidies that make health insurance affordable for millions of Americans, and tens of thousands of West Virginians.

In a 6-3 ruling, the Court found that premium subsidies should be available both in states that have set up their own health insurance exchanges, and in states that use the federal exchange, like West Virginia.

The plaintiffs in King vs Burwell case contended that the under the law, premium subsidies should only be available in states with their own exchanges, not to those enrolled through the federal exchange. This argument was supported by a number of conservative politicians, including West Virginia’s Attorney General Patrick Morrisey.

However, the Court rejected that argument, making subsidies available in all states, marking the second time the Supreme Court has upheld a key Affordable Care Act Provision.

West Virginia is one of 36 states using the federal exchange rather than setting up its own exchange. Had the Supreme Court’s ruling gone the other way, West Virginians in the federal exchange would have lost their premium subsidies, in some cases tripling the cost of health insurance.

The are approximately 33,000 people enrolled in health insurance plans through the exchange in West Virginia, with about 25,000 qualified for premium subsidies. In 2014, those with subsidized exchange plans in West Virginia saw their monthly premiums reduced from $415 to just $113, meaning that 78% of premium costs are covered by subsidies. At that rate, in 2016 the subsidies could save low and moderate income West Virginians over $185 million.

Since the enactment of the Affordable Care Act, West Virginia’s uninsured rate has plummeted from 17% to 6.6%, almost entirely due to the law. With the Supreme Court’s ruling today, that progress in insuring West Virginia’s population has been protected and the destabilization of the individual market has been prevented, and West Virginia remains one of the biggest Affordable Care Act success stories.

Budget Beat – June 19, 2015

This Father’s Day: Helping Working Fathers

Two working-family tax credits, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), are powerful tools for reducing children’s poverty and helping families put food on the table, while boosting the local economy.

About 13 million fathers in low- and moderate-income working families received either the EITC or the low-income portion of the CTC in 2012. About 72,000 of those fathers live right here in West Virginia.

It’s time to call on Congress to make permanent key provisions of the EITC and Child Tax Credit (CTC) instead of pushing these working dads into poverty.

2015 fathers day meme Facebook
Reducing Greenhouse Gases in West Virginia

This week Downstream Strategies and the Center for Energy and Sustainable Development at the WVU College of Law released “The Clean Power Plan and West Virginia: Compliance Options and New Economic Opportunities,” a new report that describes strategies for West Virginia to meet the requirements of the proposed EPA Clean Power Plan rule.

The goal of the federal Clean Power Plan is to reduce greenhouse gas emissions by 30 percent by 2030. The report lays out ways in which West Virginia can meet that goal. Here’s more from West Virginia Public Broadcasting.

The Cost of Unhealthy Lifestyles

Earlier this month, Ted presented at the annual Try This conference in Buckhannon, WV. The topic of his presentation was Healthy Lifestyles and Economic Development.

His presentation focused on the benefits of a healthy population including lower health care costs and greater economic productivity.

In 2009, the cost of obesity alone cost West Virginia $1.2 billion.

Unhealthy Cycle Try This presentation

More Job Opportunities

Here are more job openings with the The Our Children, Our Future Campaign. For more, please see last week’s Budget Beat.

1. Looking for Try This VISTAs! Try This is an exciting movement to help knock WV off the top of the worst health lists (trythiswv.com). VISTAs are full-time, 35-hour/week, federal positions that receive a $449 stipend every two weeks plus some help with student loans. If you are interested, send a cover letter and resume to Stephen Smith (with VISTA in the subject heading) that clearly states your reason for wanting the position, your desired start date (June or August), the particular skills and experiences you want to bring to the organization, and what area(s) of the project you are most interested in working on, and why. Go here for more information.

2. Become an OCOF Volunteer or Intern! Interns/volunteers must give at least 10 hours/week for at least 4 weeks (though we encourage longer commitments). We have internships in a wide range of areas – community organizing, policy issue research and support, conference and event planning, policy advocacy, on-line media and activism, fundraising, strategy, and data management. If you are interested, please send a cover letter and resume to Stephen Smith clearly stating the time you have available, your specific interest areas, and a paragraph about what your ideal internship or volunteer experience would look like.

3. Jobs at KISRA. KISRA (Kanawha Institute for Social Research and Action) has regular job postings up here: Current positions include a part-time culinary instructor.

4. Can’t knock on doors? Volunteer from your own computer two-five hours/week doing data entry.Contact Alexandra with “Data Volunteer” in the subject heading if you are interested in becoming one of our treasured data entry volunteers.

Budget Beat – June 12, 2015

Income Tax Cuts for Wealthy Unlikely To Boost West Virginia Economy

As the legislative committee charged with overhauling the state’s tax system continues its regular meetings, concerns continue over what recommendations will emerge from this process.

Reducing or outright eliminating the state’s personal income tax has been a regular topic of discussion before the committee. Legislators have lots of examples of how such proposals can impact a state’s budget and in Part III of his blog series on the issue, Ted explains several outcomes.

In 2016, the $1.9 billion expected to be collected in personal income taxes alone in West Virginia could nearly pay for the state’s public education costs. That’s a lot of money to replace in the state budget and getting rid of it will likely mean deep funding cuts for schools and other important services, making West Virginia an unattractive place to live, work, and raise a family.

Here’s more from the Center on Budget and Policy Priorities on how tax-cutting states have fared economically.

CBPP biggest tax cutting states chart
Supreme Court Decision Could Impact Thousands in West Virginia

Once again the fate of the Affordable Care Act is before the U.S. Supreme Court. In late June or early July, the Court is expected to rule in the King v. Burwell case. According to the Urban Institute, a ruling in favor of the plaintiff could cause 41,000 West Virginians to lose their tax credits, and 49,000 West Virginians to drop their insurance plans due to rising costs. Here’s more.

Deadline for Policy Proposals to Help Fight Poverty in WV

Time is running out to submit a policy proposal for the Our Children, Our Future Campaign’s annual Policy Workshops and Symposium.

Making your voice heard on an issue you think needs attention will require a submitted application and participation in at least one workshop and the symposium.

The deadline to apply is Monday, June 15!

Our Children Our Future with Children SilhouetteJob Opportunities

The Our Children, Our Future Campaign has several job opening available now!

1. Full-time Try This Coordinator: Try This West Virginia is a statewide movement of West Virginians who want to help knock our state off the top of the worst health lists, community by community. This person would work with the Try This directors to help expand the movement. This is a dream job for the right person – someone who has a passion for healthy food and physical activity and a wide range of skills to help us build the Try This movement. Go here for more information.

2. Full-time, Our Children, Our Future Regional Organizer: perfect candidate will work hard to 1) bring new leaders and volunteers into our work, 2) help plan events/candidate forums/trainings in their region, and 3) lead advocacy efforts on a wide range of issues related to children and family. Pay is competitive ($32-38k, plus health benefits, generous vacation, and travel reimbursement) and position will likely cover the northern region of the state. To apply send a cover letter that gives details about why you are interested in the position and what skills/experiences you will bring to the table; 2 professional references; and a resume to Stephen Smith.

3. Our Vote, Our Future Door-to-Door Organizer. Earn ~$10/hour going door-to-door, registering and educating voters about key issues that affect children and families, and asking them to take action by making a donation or writing a letter. Hours are 2pm-10pm. Canvass is based in Charleston, but will sometimes travel. Must have experience fundraising or be willing to learn. E-mail a cover letter and resume to Alexandra Gallo.

Income Tax Cuts for Wealthy Unlikely To Boost West Virginia Economy (Part III)

While the last post found that state income taxes have little or no impact on interstate migration, there is also little evidence that slashing or eliminating the personal income tax is a surefire way to boost economic growth in the Mountain State. Most of the states that have followed this path recently have not experienced stronger growth, but they have seen their budget deficits grow. And this means less investment in education, infrastructure, higher education, and other important public goods that provide a foundation for a strong economy. The theory that income tax cuts for the wealthy lead to stronger economic growth is also deeply flawed and contradicted by real world experience, as we shall see.

Here are five simple reasons why we should be very skeptical about cutting income taxes on high income businesses in West Virginia:  

States without income taxes not outperforming those that have income taxes

One simple. but somewhat crude. way to gauge whether the lack of an income tax is a good predictor of economic growth is to examine the performance of states with and without an income tax. While policymakers in West Virginia have not (yet) claimed that no-income tax states are doing better than states with income taxes, high ranking officials in other states, and groups like ALEC and Americans for Prosperity, have all used this as a talking point in advocating for eliminating the state personal income tax.

According to a recent report from the Institute on Taxation and Economic Policy, states that go without personal income taxes have failed to outperform others. As the chart below illustrates, between 2002 and 2011 states without income taxes experienced slightly lower economic growth (real GSP per capita), a larger decline in household median income, and similar unemployment rates. 

tax and grown ITEP

States that cut incomes taxes are doing worse

Not only is there little difference in economic performance between no-income and income tax states, but a number of states that have recently cut income taxes in the hope of boosting economic growth have not performed any better as well. From 2002 to 2007, six states – Arizona, Louisiana, New Mexico, Ohio, Oklahoma, and Rhode Island — enacted significant personal income tax cuts on the premise that it would boost economic growth. Three of these states – Arizona, Ohio, and Rhode Island – have seen their share of national employment decline, while New Mexico, Oklahoma and Louisiana have enjoyed above-average employment growth mostly due to the sharp rise in oil prices during this period. 

More recently, since 2012, five states have sharply cut their personal income taxes in the hope of boosting economic growth. Of the five, only North Carolina has outperformed the nation in job and personal income growth. Despite its recent economic performance, North Carolina has made substantial budget cuts and is drastically underfunding schools, colleges and other important public services businesses need to thrive.

Kansas, which enacted the largest personal income tax cuts in recent history, has performed especially poorly. Since Kansas enacted its tax cuts (January 2013), its jobs base has grown only by 2.9% compared to the national average of 4.6% over this period (ending in April 2015) and its personal income growth was 4.3% compared to the national average of 4.6% (2012Q4 to 2014Q4).

Growth Rates bt tax cutting states US avg

When Kansas Governor Sam Brownback enacted these tax cuts he said this would provide a natural experiment in supply-side tax cuts and that the cuts “will be like a shot of adrenaline into the heart of the Kansas economy.” The opposite has happened, along with a $400 million budget hole. West Virginia has also undergone a natural experiment in supply-side economics, cutting business taxes significantly since 2007. The results have been similar: large budget cuts along with very poor job growth

Reality bites when theory rules the roost

As businesses have shifted from paying the corporate income tax to paying the individual income tax (because many companies are now pass-through businesses [S corps, limited liability companies, partnerships, sole proprietors]), policymakers have argued that cutting the personal income tax will lower business costs, thereby boosting investment and job growth in the states that do so.

While standard economic theory predicts that business tax rates can impact whether a business chooses to locate in a particular state because lower taxes mean lower costs, this is only true if all other things are equal (Ceteris paribus) and there’s perfect market competition. Of course, this is almost never the case because there is no such thing as a free market (it is a political construct) or perfect market competition, and states never hold “all other things equal” when they make tax changes that impact public investment.

The theory also hinges on the faulty assumption that the level of taxes are large enough to influence firm behavior or that business taxes are not passed on to customers via higher prices. In reality, business investment and location decisions revolve around a host of considerations, many of which can play a much larger role than state taxes. For example, the cost of electricity, occupancy (rent), raw materials (or inputs), transportation, and labor are usually much larger costs than state and local taxes and can have a greater impact on profit margins especially in different states. As Sean has pointed out, the variations in wages across states is much larger than the savings of any proposed tax reductions. 

The strategy of tax cuts to lower the cost of doing business is also focusing on a very small component of business costs. For example, according to COST, U.S. businesses paid a total of $648.8 billion in state and local taxes (including corporate and individual income taxes, sales and severance taxes, local property taxes, and other taxes) in 2012. According to the IRS, businesses in 2012 deducted $27.7 trillion in federal, state and local business taxes. This means, at the most, business taxes represented about 2.3% of the cost of doing business in the United States.*

cost of doing biz WV If we assume that West Virginia’s share of the $27.7 trillion is commensurate with the state’s share of national private GDP (0.42%), this pushes the share up to 3.3% based on the COST estimate that businesses paid $3.7 billion in state and local taxes in West Virginia in 2012.

One reason West Virginia might be higher is because of its large mining sector. This means for most businesses in West Virginia state and local taxes are probably much closer to 2.3% of total business costs (and even lower lower after their federal reduction of state and local taxes). 

Put another way, if West Virginia abolished its personal income tax it would only reduce average firm cost by about 0.2% at the most.

In sum, it is entirely reasonable to argue that state and local taxes have a relatively minor impact on corporate location decisions because they constitute a small share of business costs and their potential influence is overwhelmed by interstate differences in labor, energy, transportation, and other costs of production, which account for almost 97 percent of total corporate production expenses.

Rational profit-maximizing businesses would also consider the level of public provisions (e.g. good schools, roads, etc.), the quality of life, the supply of a qualified workers, and other state and local policies. Businesses might also look to national tax policies and national economic conditions when looking to expand and make a profit. All of these other considerations throw cold water on the theoretical argument that state taxation alone will have a large impact on economic growth.

This is why it’s very important to move from theoretical assumptions governing the behavior of state business growth and taxes and to focus on the empirical studies that have looked into the impact of state taxes on economic growth.

Tax cut theory at odds with academic research

A recent review of academic peer-reviewed studies by Michael Mazerov at the Center on Budget and Policy Priorities concluded that “of the 15 major studies published in academic journals since 2000 that examined the effect of state personal income tax levels on broad measures of state economic growth, 11 found no significant effects and one of the others produced internally inconsistent results.” This means for every one academic study that found personal income taxes boosted state economic growth, there were about four that found no significant effects. A new and very rigorous study conducted by the Tax Policy Institute further undermines the claim that states can improve their economies by cutting personal income taxes. The study found that personal income taxes have a statistically insignificant impact on growth.

So, if anyone ever tells you that there’s a consensus among economists or that “economic theory predicts” that lower state personal income taxes boost economic growth, all you have to do is look at the recent empirical academic evidence and the real-world examples that are unfolding badly across the country. 

Cuts in personal income tax usually result less public investment

While not all income tax cuts are created equal (more on that soon), states that have cut income taxes (mostly for the wealthy) across the country did not do so in a revenue neutral way. Instead, the tax cuts had the predictable consequence of creating large budget gaps that were met by smaller investments in education, higher education, and other important public goods that are vital to support private sector growth (sound familiar?).

In fiscal year 2016, West Virginia is expected to collect about $1.9 billion in personal income taxes. To put that in perspective, the personal income tax alone could nearly pay for our state’s public education costs and it brings in nearly twice what the state pays in Medicaid costs. Because West Virginia must balance its budget, personal income tax cuts that fail to produce the promised economic gains almost certainly will lead to deep funding cuts for schools and other public services. This would not only hold our economy back and exacerbate income inequality, but it would make West Virginia an unattractive place to live, work, and raise a family.

Rather than bet our future on a strategy that has failed to deliver in other states, we need to be making smarter public investments that support the private sector and create an environmental for all to succeed.

____

 *Using the IRS 2012 figure of business taxes deducted of $569 billion drops this share to 2 percent.It is also important to recognize that the IRS figure includes federal taxes, not just state and local taxes.  This number also does not consider that state and local taxes can also be deducted from federal income taxes paid, which would lower the effective state tax rate. For more on this methodology, please see footnote 5 ( http://www.cbpp.org/research/vast-majority-of-large-new-mexico-corporations-are-already-subject-to-combined-reporting-in)