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Showdown in West Virginia over Shutdown Provides Tax Reform Opportunity

April 28, 2017

West Virginia Gov. Jim Justice (D) and the state’s legislature may have to cooperate on tax relief this summer to avoid a June 30 lapse in payments owed by the state government.

West Virginia Gov. Jim Justice (D) and the state’s legislature may have to cooperate on tax relief this summer to avoid a June 30 lapse in payments owed by the state government.

Justice rejected legislators’ budget bill, passed hours before the House of Delegates adjourned for the year in April. Justice called proposed reductions in entitlement spending “a bunch of political you-know-what.”

During an upcoming special session in June or July, lawmakers may offer Justice a compromise bill incorporating elements of a bill, proposed by state Sen. Robert Karnes (R-Upshur), offsetting an increase in the state’s sales tax with income tax relief.

Senate Bill 409 would lower the state’s top income tax rate from 6.5 percent to 5.45 percent and reduce tax rates by 0.1 percentage points across the board in years when sales tax revenues exceed a specified amount.  

The Senate approved SB 409 in March, and the bill was referred to the House Finance Committee, allowing it to survive the end of the regular session.

More Money, More Growth

Karnes says decreasing income tax rates will allow people to keep and spend more of their money, encouraging economic expansion.

“Lower personal income taxes will put more disposable income into the hands of ordinary West Virginians,” Karnes said. “That money will be spent in the economy, driving business growth and job growth across the state. You actually get two effects there: First, people spending money and, second, people investing money. And long-term, that causes greater growth.”

Ripple Effects

Garrett Ballengee, executive director of the Cardinal Institute for West Virginia Policy, says allowing people to keep more of their income causes numerous positive effects on the economy.

“As an economy accumulates savings, interest rates tend to go down, which makes more projects profitable, so investment in things like new technology, machinery, buildings, labor, etc. tends to increase,” Ballengee said. “This is the basis of economic growth, which West Virginia desperately needs.”
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Taxes
Author
Ben Johnson (therightswriter@gmail.com) writes from Stockport, Ohio.