Tax Hikes Shouldn't Be Part of West Virginia Tax Reform
For decades, the West Virginia legislature has budgeted without fiscal restraint or reforms. In 2014, for the first time since 1929, Republicans took control of the House of Delegates and state Senate. Confronted with an overspending problem, some legislators are considering a short-term fix, a tax increase.
Tax revenues are falling, the state budget has used the Rainy Day fund three years in a row, and there is an estimated outstanding $1 billion in repairs for upgrading roads and bridges. The solution that some West Virginia legislators have come up with is a cigarette tax hike on low and middle-income consumers.
Senate minority leader Jeff Kessler, D-Marshall, has criticized the cut in taxes that eliminated grocery taxes, phased out the business franchise tax, and the recent business tax reductions from 2006. Kessler proposed legislation last year that would have raised taxes on cigarettes.
“We need to start investing in our people. If that requires raising some taxes, then that’s the way to go,” Kessler said. According to a Gallup poll, “More than half of smokers earn less than $36,000 per year.” Even worse, over a third of smokers make less than $12,000 a year.
He claims, “things folks want — a qualified, skilled, educated and sober workforce; workforce participation; infrastructure and roads” are at stake if legislation to give tax cuts to big businesses are in the works.” Kessler claims he wants to help blue collar workers, but raising cigarette taxes will hurt those consumers most.
Even more, cigarette tax hikes rarely meet revenue expectations. Of the 32 state tobacco tax increases that went into effect between 2009 and 2013, only three met or exceeded revenue projections. After cigarette tax hikes, consumers seek out alternative tobacco products that are less expensive or available across state borders in lower taxed states.
58% of cigarettes smoked in New York, for example, are smuggled from out of the state, according to the Tax Foundation. This also results in decreased tax revenue.
For decades, as the population has declined and West Virginia has failed to attract new businesses or taxpayers, the government has overspent instead of enacting pro-growth reforms. There absolutely is waste to cut from West Virginian spending but unfortunately there is very little accountability to the budget processes. The State Integrity Investigation gave West Virginia a D- in that category. Taxpayers have to pay for the feckless choices of their representatives according to Kessler’s philosophy on taxes.
“It [lowering taxes] hasn’t worked and no one can show me a place where it has.” Try Arizona, Florida, or Texas for examples Senator Kessler. The correlation between states with lower tax burdens and taxpayers and business migration is quite strong. From income to corporate tax reductions, states that let taxpayers keep more of their income are the bigger beneficiaries of those looking to leave less friendly states. Many governors and legislatures that understand that entrepreneurs bring growth have made their states competitive, tax-wise. It is an act of willingly ignorance for Kessler to deny this.
It’s time for the West Virginia government to get serious, cut spending, lower taxes, and stay out of the pockets of its citizens as much as possible. Some have suggested it may not be the right time for tax reform. In the case of West Virginia, this couldn’t be further from the truth.