CHARLESTON, W.Va. (AP) – While West Virginia is on the verge of losing a congressional seat again due to the continuing decline in population, Republican lawmakers are convinced that a massive reduction in income taxes is the key to reversing the trend stop. But figuring out how to do it without harming the most vulnerable of the state or punching a big hole in the budget is complicated.
An attempt to reach a compromise on how to pay the tax cut hit a major hurdle on Friday.
The weekend after the legislative session ended, Republican Gov. Jim Justice said the House of Representatives would not pass his bill, which was approved by the Senate.
“It certainly closes the door for now,” Justice told reporters Friday, adding he could recall lawmakers to take it up. “I heard the door slam really hard when the house said we were not picking it up.”
Although the United States has doubled its population over the past seven decades, West Virginia has taken the other direction. With the long-term decline of the coal industry, it is the only state in the country with fewer inhabitants than in 1950. Figures from the 2020 U.S. census, which is expected to be announced later this month, are expected. seats will decrease. in the U.S. House from three to two.
Justice and other Republicans have said for weeks that a pandemic that devastated some state budgets underscores the positive side of their state. They say the rising mountain views, wide open landscape and low cost of living have given the state a chance to attract new residents through lower taxes.
“The whole world is looking at us right now,” Republican Gov. Jim Justice said this week. “There’s a huge urgency.”
Justice blew House Republicans because they effectively killed the bill. He promised to launch a ‘road show’ to storm the state advertising its income tax proposal. He said he could convene a special legislative session later this year.
Despite the one-party rule in the state, Justice has struggled to convince its fellow Republicans what a major tax cut should look like. According to many people, a state that has been experiencing economic problems for a long time needs to be careful about increasing its sales tax or taking other steps that could harm its most vulnerable people.
Critics said leaders are embarking on a population growth experiment that is likely to lead to cuts in education and social services in one of the poorest countries in the country. The latest plan approved by the Senate after weeks of wrestling would lower the income tax by 40% and increase the sales tax from 6% to 8%, which is the highest rate in the country. Justice originally tried to reduce income tax by 60%.
It also includes a myriad of tax increases for energy companies and the service sector. A controversial tax on groceries has been scrapped from the Senate Bill after the governor called it a ‘showstopper’.
In an interview before its bill was dropped, Justice said the state is able to benefit from an income tax cut due to the state’s proximity to the east coast and population centers.
“And if you do not think it will drive the population to the state of West Virginia, you are completely wise,” Justice said.
The population of West Virginia has been declining by 11% since 1950, when it reached a peak of just over 2 million inhabitants and brought its economy together on coal mines.
Experts believe that there is no consensus on whether low taxes are stimulating population growth.
“There is no credible evidence to support this,” said Kim Rueben, director of the Urban-Brookings Tax Policy Center’s state and local finance initiative. She said taxes may be one factor that can drive businesses and residents, but it is not the only one.
“We are putting a lot of our eggs in the basket, that it will grow our population, and that growth will help pay,” said Sean O’Leary, a senior policy analyst at the West Virginia Center on Budget & Policy. said, which was critical of the proposal.
Jared Walczak of the Washington-based Tax Law Foundation, a right-thinking tank, points to nine states that have no income tax and says “there is a real profession.”
But he added that ‘there is also no such thing as a silver bullet in taxation. The goal is to grow the economy. “And he warned against too rosy estimates: ‘Sometimes it’s easy to get carried away with the consequences.’
On Good Friday, about two dozen people outside the state Capitol in Charleston held signs and spoke out against the legislature’s proposals, which are flying the cuts to higher education.
“It is immoral, inhuman and unacceptable to carry our bags with the guts of the poor,” said Rev. Ron English, president of the Charleston NAACP.
The income tax accounts for about 40% of the state’s revenue, leaving the majority of the IDP in the State House in disagreements over how to balance future budgets. More conservative members wanted to cut spending and opposed raising taxes on energy companies.
Justice, a businessman with investments in coal, said businesses could afford to throw in a few extra cents, while critics in his party said the declining industry had endured enough pain.
The Senate approved its bill late 18-18 Wednesday after five Republicans joined it in all 11 Democrats.
A former Democrat, Justice, does not like to cut taxes if it means placing an “incredible burden back on those who are struggling the most.”
But a luxury tax on any item costing at least $ 5,000, which is camped by the governor, did not make it into the Senate version. Republican Senate President Craig Blair initially indicated at a compromise meeting that he was open to the idea.
Blair represents Berkeley County, a bright spot for growth in the state’s eastern panhandle. The largest city, Martinsburg, is about 1.5 hours from Washington, DC, and the county borders both Virginia and Maryland.
Blair and other Republicans in West Virginia have visions of attracting new residents – and their spending habits – to settle just a little further west. And if they can negotiate a new compromise, they hope the prospect of paying little to no income tax is just the thing to lure them there.