Cut Taxes for Working West Virginians

Cut Taxes for Working West Virginians
Photo by Kelly Sikkema / Unsplash

This piece was originally published in the Wheeling Intelligencer in June, 2015.]

Republican politicians in Charleston have been pretending to “study” the West Virginia tax code at a few recent meetings. I put “study” in quotation marks like that because state Senate President Bill Cole, R-Mercer, already telegraphed exactly what results he wants the study to reach. Basically, the committee meetings exist to provide cover for a plan to shift taxes away from Cole’s wealthy backers and onto working class people. This plan has been tried before, and the results have been disastrous.

The chart to the right, “Averages for all states,” illustrates how heavily state and local taxes fall on people who are poor, working class, or trying desperately to become middle class. All the weight sitting on the chests of Americans making less than $18,000/year may come as a surprise, but that’s reality. Just because people say that the working poor don’t pay taxes doesn’t make it true. The slander that 47 percent of Americans are moochers is just that – slander. Everyone is chipping in here in America, and if anyone is paying more than their fair share, it is working families.

But I don’t want anyone getting me wrong: there are serious problems with West Virginia’s tax code; we can fix them, and we should. A real study of our system shows that our tax code overburdens working families and doesn’t treat small businesses fairly. In effect, antique structures within our tax code “rob from the poor and give to the rich.” Several specific changes, including a state Earned Income Tax Credit, tax exemptions for clothing purchases, and avoiding using gas taxes to fund road building are concrete steps that could modernize our system and increase quality of life for all West Virginians.

Too few West Virginians are working and this saps strength from our economy. Making work pay better via a West Virginia Earned Income Tax Credit would increase employment and reward work. Such credits have a proven track record of lifting families out of poverty or near poverty. After the federal EITC expanded in 1993, millions of people who had been out of work got jobs, and unemployment fell to record lows a several years later.

Moreover, 24 other states already have such credits. These credits raise people up from dependence and poverty and into work and self-sufficiency. By encouraging work – the credit requires that a recipient “earn income” – the credits help to pull people off assistance and into productive jobs. Not only do the recipients reap the financial benefits, they then add to the economy we all share when they spend their money. Even more important, they gain the pride that comes from earning a living.

As another chart at right, “Who pays in West Virginia and how much?” shows, West Virginians making less than $50,000/year are paying higher rates in state taxes than those making more than that figure. That isn’t fair and we should immediately correct it. Moreover, the “cost” of EITCs will nearly all be recouped, as those funds will be expended here in West Virginia, boosting our own local businesses and communities.

Sales taxes tend to hit working families the hardest, because they spend most of their income buying tangible goods they need to live. Eliminating the food tax helped somewhat, but we should not have sales tax on a basic supply of clothing, so we should credit back taxpayers a reasonable amount so that struggling families can afford decent clothes. A number of states already do this and we can join them.

Because working people have to spend most of what they earn to live, they don’t benefit from major tax preferences we already have for the kind of market speculation wealthy people do. Nationally, we continue to have the scandalous “carried interest” tax deduction that allows billionaire hedge-fund types to pay 15-20 percent on income that would be taxed at 29 percent or more if it came from working at a real job. We can’t fix that here in West Virginia, but we don’t have to imitate it.

Republicans are constantly selling tax cuts on what they call “savings and investment,” that are supposed to encourage wealthy people to create businesses and jobs. No matter how many times this strategy is tried, the result is always the same. The influential businesses that lobbied for the cuts pocket the cash and nothing “trickles down” to the rest of us. Small businesses get completely left out because a small business ends up being taxed just like a working person – the Republican tax cuts go only to big business.

The massive, multi-trillion dollar Bush tax cuts for tycoons in the early 2000s put the whole economy in the ditch. At the level of the states, several have gone nearly bankrupt using the same wrong-headed formula. Tax cuts on big business in West Virginia have led to problems in the budget and a lack of money to invest in higher education – both bad outcomes. We cannot afford to burn our seed corn and short-change education in this day and age. Neither can we shift the burden to county government.

The tax solution that works best is the one that favors a rising and working middle class. When 70 percent of the entire U.S. economy is consumer spending, there really is no substitute for putting money in the pockets of working families who spend it locally and keep the country moving.

Making sure the well-to-do pay their fair share, reducing the sales tax they pay, instituting a state EITC to make work pay, and keeping taxes low on basic necessities like clothing and gas, can get West Virginia back on the road to full employment and a broadly enjoyed, middle-class prosperity.