Governor Jim Justice’s tax reform roundtable Monday was an enthusiastic pep rally for tax cuts. Justice brought in two of the country’s leading tax cut advocates—Americans for Tax Reform President Grover Norquist and Heritage Foundation distinguished fellow in economics Stephen Moore—as the big names on the panel.
Norquist and Moore want West Virginia to join the handful of other states that have totally eliminated their personal income taxes.
“Get it done, and get it done right, and bring the rate down to zero over time,” said Norquist. “This is a march to zero. West Virginia can lead the way.”
“Go big or go home,” Moore said. “Cut the income tax as much as you can,” with the goal of getting it to zero.
Justice was front and center to lead the cheer. “We’re all on the same page with one another,” Justice said. “The lower our personal income tax the better.”
But it is not clear that everyone is on the same page. For example, Senate President Craig Blair, who was also on the panel, again advocated for a more cautious approach.
He explained how energy severance taxes, which make up half of the expected $2 billion surplus this fiscal year, could be reduced dramatically by a bust in prices. He warned about additional expenses on the way for Medicaid reimbursements. And he repeated that income tax reductions do not reach all West Virginians.
That is why the Senate plan includes a more modest income tax reduction—15 percent, compared with 50 percent in the Governor’s plan—but also a rebate for personal property taxes that individuals pay on vehicles and a 50 percent reduction in the personal property taxes on equipment and inventory for small businesses.
“We’re looking for how to thread the needle, so it works for everybody,” Blair said.
But Norquist and Moore are not needle threaders; they are heavy duty cloth cutters. After all, Norquist’s organization is the keeper of a pledge that 189 members of the House of Representatives and 42 members of the Senate have taken to never raise taxes.
Now they are helping generate the momentum for states to eliminate income taxes, and they see West Virginia as a likely candidate to be the next state to join.
However, even some of the most enthusiastic tax cutters are cautious. After all, personal income tax collections make up the largest category of revenue collection for the state. Last fiscal year, the state collected $4.6 billion in taxes for the General Revenue Fund, and $2.2 billion (40 percent) came from personal income tax collections.
Yes, West Virginia policy makers should cut taxes. The expected $2 billion surplus this fiscal year is evidence that West Virginia taxpayers are significantly overpaying, and they are due relief. However, as Blair pointed out, even with only a partial list, there are major expenses on the horizon adding up to hundreds of millions of dollars.
Justice’s tax cutting panel with star witnesses did generate enthusiasm for huge tax cuts and making West Virginia a desirable low or no tax destination. But that fervor should not cloud the potential risk of what it means to “go big.”