In January 2011, the State of Kansas embarked upon an experiment, where they deliberately slashed tax rates without a plan to replace the revenue. The revenue would be replaced, and indeed it would grow, due to the influx of investment and residents responding to the reduced tax rates. Alas, this plan ran afoul as reality intruded, and in order to maintain a balanced budget, the state had to cut spending for education and other expenses. Finally, the state legislature had to wrest control back from the governor, and raise tax rates back to their previous level in order to keep schools from imploding, and get the state’s bond rating back to an acceptable category. Governor Brownback ended up resigning his office, only to land on his feet when the President nominated him to be the US Ambassador-At-Large for International Religious Freedom. Governor Brownback was so toxic that it took two congressional sessions for his nomination to be approved, and it was only approved when Vice President Mike Pence broke a tie to place him in this newly-created office.
Never one to learn from the experiences of others, the West Virginia legislature this year is treading much of the same path that Kansas did a decade ago. Flush with cash from COVID legislation, the governor of West Virginia has proposed slashing the state income tax in half this year, with a view at eliminating it altogether in the future. He is proposing to replace the revenues with a combination of sales tax increases, and expansion of items that will be covered by sales tax. He also is proposing increases in certain sin taxes. But his plans are bereft on guidance on how the basic needs of the state will be met when eventually 41% of the taxes funding the state budget are eliminated.
At the same time, the state legislature is proceeding to add another layer of bureaucracy in the state judicial system, by instituting an appeals court system. Considering that the workload for the Supreme Court of the state has declined precipitously over the past decade, the addition of the new court layer is aimed at pleasing the corporate clientele of the legislature, as they enable another opportunity to delay and perhaps overturn verdicts from lower courts. And at the suggestion of the Governor, two new cabinet posts have been created, and given the natural tendency of bureaucracies to grow over time, state government appears to be growing instead of shrinking.
Now, looking ahead a few years, one can envision a future where it becomes obvious that the revenues lost from the income tax rate reduction have not been replaced from the consumption tax increases. Since there is no more coverage of state expenses from federal appropriations, the state will have to look for opportunities to cut. Indeed, the targets have already been floated for a significant portion of the cuts. It’s in higher education, where the flagship universities of Marshall and WVU offer the chance to reduce expenditures and force the increased expenses upon the students in the form of higher tuition and fees. Oh, by the way, the program that the state has to off-set tuition, the Promise Scholarship? That is also in the gunsights of those who would plow ahead and reduce the income tax rates to zero.
What would be the potential gain for making these cuts in tax rates? Why, the increased revenues coming in from the flood of business investment, and the in-migration of residents who react solely to tax rates as a way of making a decision about where to live.
Look, this state has a well-deserved reputation for refusing to value education. We are the lowest in the nation regarding post-secondary graduation rates. We have difficulty in providing potential employers with an educated work force already. To put the screws further on the universities of this state is self-defeating. Instead of cutting education further, we need to enable students to attend community college, and to improve the offerings of community colleges to better match up with the needs of employers. The last thing we need to do is cut aid to the institutions that offer us hope of moving ahead in the world.
By the way, most people do not make decisions about where to live solely based upon tax rates. Maybe in the case of New York, and California, where income and property taxes are significantly higher than in West Virginia, tax rates are a factor, but in a state with competitive total taxation, the little bit of tax reduction we can offer will not be a significant driver of behavior. A better determinant will be whether broadband access is adequate (it’s not in much of the state), and whether the local roads are adequate (they are horrible once you get off of the interstates and Appalachian corridors). And also, the issue of schools and support for the same comes into play. Needless to say, this legislature is also toying with the idea of cutting funding to local schools in the future by proving vouchers for homeschooling or private schools (in person or virtual). Just what we need, an opportunity for the next generation of this state to be able to marinate in their petri dish of ignorance and intolerance rather than be exposed to the real world through the public school system.
Speaking of the reputation of this state, our legislators seem bound and determined to uphold our perception of being a bunch of yahoos who don’t belong in civil society. After all, it is not every state legislature that has a newly elected member film himself entering the Capital during the January 6 riot. It certainly is not the case where several members of the legislature wear masks made of mesh on the floor of their chamber so as to comply with the letter of the regulations concerning face covering. It is not every state that has multiple bills being offered to pull back on sex education in the schools, and eliminate any chance for providing protection to those who do not choose to use the missionary position to procreate. Yes, the national media does not tire of holding up examples of West Virginia politicians in order to feed the stereotypes to the national audience, and we keep giving them ammunition. This past election has resulted in Republican supermajorities in both houses of the WV legislature. The members certainly seem to be having fun as they dance upon the shredded remnants of decency and hopes that this state can ever float the ship of state off of the shoals we foundered upon many years ago.