Budget Beat - April 24, 2015
Tax Reform Continues to Make Headlines
On May 4, the Joint Select Committee on Tax Reform will hold its second meeting to look at how to "update" the state's tax system. So far committee members have floated around some hefty suggestions, like eliminating the Personal Income Tax and further reducing business taxes. Suggestions for how to replace that lost revenue and pay for these cuts have been less in the news.
Ted's opeds in the Charleston Daily Mail and the Sunday Gazette-Mail both explain why the legislature should move with caution before slashing anything else from the state budget, the state Personal Income Tax in particular. As he states, here are some other avenues that tax reform could take:
- Raising tobacco and alcohol taxes to improve the health of West Virginians and reduce state medical expenses.
- Updating the Personal Income Tax by reducing taxes on the middle class and increasing them on higher income people, who have gained the most economically since the end of the recession while middle-class wages have stagnated or declined for most workers.
- Modernizing the sales tax to reflect the changes in our economy from consuming goods to purchasing services.
- Closing offshore corporate income tax loopholes.
- Closely scrutinizing and scaling back business tax subsidies.
Tax Incentives? What Tax Incentives?
Here's something to chew on from a North Carolina study: according to Economic Development Quarterly, "contrary to the belief among many economic development practitioners that tax credits are a motivating factor for firms to engage in economic development, only 30% of executives in incented companies were aware that their company had received a state economic development tax credit."
Time for a West Virginia EITC
Tax time is hard for all of us, especially low-income working families. The federal Earned Income Tax Credit (EITC) provides tax relief to those families, helps them keep money in their pockets, and, in turn, boosts the local economy. Twenty-five states and the District of Columbia also have their own EITC which gives those same families relief from state taxes as well.
West Virginia has over 180,000 people living in poverty. That's more than the populations of Charleston, Huntington, Parkersburg, Wheeling and Beckley combined.
It is time for a state EITC in West Virginia to help those families.
This would help reduce the current inequity in the state's tax system where those who earn less than $16,000/year pay an average of 8.7% of their income in state and local taxes, while those earning above $306,000 pay only 6.5%.
For more on why West Virginia needs a state EITC, check out Sean's blog post.
Budget Cuts Hitting Home
Tax cuts are already causing harmful budget cuts, another example of which hit the news today with an announced tuition hike at West Virginia State University. College students are paying the price for years of budget cuts as tuition increases create a greater burden on their families' budgets.
Happy Earth Week!