Editorials, Opinion

Politicians’ vision for state’s financial future doesn’t fit the reality

Gov. Justice is beating the same income tax drum he banged on through most of the regular legislative session, and he’s drumming up even less enthusiasm this time around. In the latest iteration of his taxation fixation, Justice proposes to slash personal income taxes by up to 10%. This, even as legislators still have an eye on the personal property tax cut set to be on the ballot in November.

Of course, how much you save depends on how much you make. So, like every proposed income tax cut, this one helps higher earners more than it helps lower earners.

According to 2019 data compiled by Data USA, more than two-thirds of West Virginians make less than $60,000. (We know wages have risen, but so has inflation, so 2019 numbers may actually be generous in terms of real value.) A 10% personal income tax cut on $60,000 only gives you back $390 a year, or $32 a month; on $30,000, a savings of $240 a year, or $20 a month. Someone who makes minimum wage will only get back $68 a year, or less than $6 a month. To put that in perspective, for middle-income earners, that’s maybe half a tank a gas a month, or one trip to the grocery store, if you save it all up until the end of the year.

The personal property tax cut is on the ballot this fall. Specifically, an amendment to exempt from constitutionally mandated taxes certain types of “personal” property.  It mostly targets machinery and equipment used by businesses, which might help a few mom-and-pop shops, but it will disproportionately benefit large chains and multi-national companies. To try to sweeten the pot, legislators threw in an exemption on personal motor vehicles. Someone who owns a $25,000 car pays around $382 a year ($31 a month) in personal property taxes for it. Once again, a pittance for the Average Joe, but a boon for high earners and big businesses.

As with any proposed tax cut, what will be gained must be weighed against what will be lost. A cut to the personal income tax might save individuals a couple hundred dollars a year; by comparison, the state will lose more than $250 million in revenue. Eliminating personal property taxes, however, will cause an even more massive shortfall.

The Dominion Post previously reported that in FY 2020, property taxes brought in about $1.9 billion. The West Virginia Association of Counties calculated that about $515 million of that would be lost every year if the amendment goes into effect: about $340 million for local school districts, $138 million for county government, $35 million for municipal government and $2 million for state government.

So as you can see, school funding would be hit the hardest — and we’ve made our stance on cutting funding to public schools clear. But that $138 million to counties is important, too.

Property taxes are a key revenue source for county governments. That money pays for all county-level courts and health departments, but it also pays for the sheriff’s department and fire and EMS; and it subsidizes water treatment, garbage and recycling services. In Monongalia, the county also funds the humane society and provides money for parks and recreation facilities that fall outside city limits.

West Virginia politicians are putting forth these proposed tax cuts as if they will save individuals tons of money — but they won’t. Justice even tries to justify his income tax cut with the state’s $1.3 billion surplus, but as Sean O’Leary with the West Virginia Center on Budget and Policy told West Virginia Public Broadcasting, you can’t justify a permanent revenue reduction with a one-time surplus.

Speaking of which … It still boggles the mind that Gov. Justice can not only brag that he’s sitting on $1.3 billion in unused tax dollars — let alone suggest cutting reliable revenue streams — when everything in West Virginia is chronically underfunded. Schools, infrastructure — you name it, and somehow there’s never enough money for it.

One cannot starve essential services and local governments, then boast about abundance.