Use caution before stampeding ahead on tax cuts

By:  Kahtleen Stoll
February 15, 2022

The West Virginia legislative session reminds me of the Wild West. You never know what magic-show patent medicine will be hawked, or what bills will stampede through the committee corrals.

I own six horses. Any warm spell means it’s time to saddle up. But, before throwing a saddle on a horse and riding off into the sunset, any cowboy will tell you it is wise to look over your horse carefully, pick the hooves and check for overall soundness. Or you can end up eating dust or worse.

Seems like the leadership in the Legislature ought to stop rushing to ride away on House Bill 4007 without really checking it out carefully. Especially if that bill could leave critical state services broken. Can we take the time to check for overall soundness?

The House Finance Committee, chaired by Eric Householder, R-Berkeley, passed HB 4007 before a lot of us watching the roundup race had a chance to even read the bill. Then, the full House passed HB 4007 last Friday with little discussion or analysis. Why the rush?

HB 4007 cuts the state personal income tax 10% and, in turn, cuts the state budget $265 million in the first year alone. After that, the bill creates a new stealth “reform fund” that increases the cuts and restrains legislators’ future budget decisions better than a barbed- wire fence. It could cripple our state’s bond rating — our ability to borrow money as needed.

The horse traders selling HB 4007 call it a big tax cut for all West Virginians. Who is really going to win that rodeo prize?

Cuts to the personal income tax disproportionately help the wealthy and do little to help struggling families. According to the West Virginia Center on Budget & Policy, eliminate the personal income tax and the richest 20% of West Virginians ride away with an estimated 70% of the loot. The top 1% of the richest West Virginia households get a tax cut 44 times greater than a family in the middle 20%. For those with income under $35,000 a year, the cut is less than $39. That’s lame.

And HB 4007 is being sold as a sound use of West Virginia’s “budget surplus.” There might be some horse trader tricks here. A budget surplus is not a hard line in the sand. Where the surplus/deficit demarcation is drawn depends on how the governor defines the baseline (the funds needed to run existing programs). Gov. Jim Justice labels the Department of Health and Human Resources “fully funded,” even though many critical job slots are vacant and the remaining staff is overwhelmed. And the governor calls for a “flat” budget, ignoring inflation

— including high health care inflation.

Ignoring inflation is another way to force cuts to state programs.

Further, the current so-called budget surplus exists in great part because of a temporary flow of federal COVID-19 relief dollars. That tap is being turned off.

A budget surplus can be accounting smoke and mirrors.

If your family can’t pay existing bills, your growing kids need new clothes, your rent went up and your great aunt left you a few bucks you already spent on fixing the car — are you ready to cut your income?

While HB 4007 would hobble health services funds for years to come, how many health providers had a chance to speak to this bill? And, at risk is more than health services. At risk is every service state government provides — including education, road repairs, parks and recreation, police and fire services, and more.

Our state must be able to afford new programs that help make work more financially rational and worthwhile: child care assistance, lower health insurance costs, lower prescription drug costs and paid leave from work for emergencies.

HB 4007 will rein-in any legislative efforts to help families get back in the saddle during hard times.

In my neck of the woods, we don’t climb up for a long ride without knowing exactly what we are doing and where we want to end up. I expect our legislators to be just as cautious. The West Virginia Senate needs to take a careful look at HB 4007 and make sure we don’t leave our state limping in the dust.

Kathleen Stoll, of Berkeley Springs, is policy director for West Virginians for Affordable Health Care (wvahc.org) and operates a policy and economic consulting business, Kat Consulting.


connect