The West Virginia Legislature began its 2021 session yesterday with a Republican supermajority, meaning that proposals important to Republicans have an excellent chance of being enacted.
The Legislature has expressed interest in improving broadband access statewide, limiting the governor’s executive powers and increasing the number of charter schools. But, its most striking goal is to completely remove the state personal income tax, as has been done in seven states and partially done in an additional two. Even Mississippi is considering this move.
Removing the state’s personal income tax is appealing, as businesses, industry and wealthy people often seek out states without such a tax. But the devil is in the details. It is vital to look at the pros and cons of what it will take to eliminate that tax here.
According to an article by Lacie Pierson in this newspaper, multiple financial decisions are needed to afford elimination of the personal income tax which is estimated to bring $2.1 billion into the state’s coffers. Here are some interesting ways the Legislature says it might make up the deficit caused by deletion of this tax.
An 8% or higher sales tax and new sales taxes on previously untaxed items including hair care, professional and contracting services is a possibility. Paired with this is the reintroduction of the food tax at 2.5% to 3%; this was gradually eliminated years ago because it was so regressive.
Among the most disturbing proposals are reductions in funds for higher education and plans to “eliminate all state appropriations to WVU and Marshall.” Really? Along with that is “elimination or reduction of Promise Scholarships,” reported to largely be funded by the West Virginia Lottery. If the goal is to bring thriving businesses and wealthier people here, canceling out higher education funding does not compute. The long-standing statewide penny soft drink tax dedicated to WVU’s medical school could be transferred to the general fund.
Other legislative suggestions to offset losses from current tax collections include “higher personal income tax on high earners temporarily until tax is ultimately eliminated,” “5% to 10% budgets cuts to public, higher education and Department of Health and Human Resources” and a “tiered severance tax on coal and gas” quickly increasing metallurgical coal taxes.
Perhaps the most interesting proposal is legalization and taxation of marijuana. It took ages to get medical marijuana approved here. Just now, 100 new medical marijuana licenses have been approved statewide; six are in Huntington and two in Barboursville. Holy smoke. That’s more local locations than McDonald’s.
There is no mention that property taxes in some personal no-income tax states including Florida, New Hampshire and Texas are at least twice as much as West Virginia’s.
The West Virginia Legislature’s 2021 session should be intriguing as it considers the pros and cons to remove the state’s personal income tax. We all want to keep our hard-earned dollars, but few want to see the state’s infrastructure demolished by the stroke of a pen. The Legislature will need rational planning and a scalpel rather than a sledgehammer.