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The West Virginia Budget Crisis

Remember the large budget deficit that confronted West Virginia lawmakers at the start of the legislative session? One estimate in November 2016 was that in FY 2018 (beginning July 1, 2017) we would generate only $4.055 billion in revenue, roughly $500 million short of anticipated spending. That brought many legislators to Charleston for the general session prepared to strip spending down to a bare minimum and force the state “to live within its means.” Fortunately, those views softened when confronted by political reality.

Now projected FY 2018 revenues are about $40 million better than first predicted due to an improving coal market and a $33 million transfer from general revenues to the Workers Compensation Fund that won’t be made. But the remainder of the budget shortfall hasn’t disappeared. How the shortfall will be closed is the subject of a House and Senate conference committee meeting today. So far, the fiscal and political stress created by the shortfall has caused Governor Justice and quite a few legislators to behave as if any idea – even a demonstrably bad one – is better than nothing.

Rep. Alex Mooney’s Feckless Vote on Healthcare

On May 4, 2017, the United States House of Representatives voted to pass the American Health Care Act (AHCA) by a narrow margin of 217 to 213, sending the bill to the Senate for deliberation. This Bill would repeal the majority of the Affordable Care Act (ACA) known as Obamacare, a promise made by Donald Trump and numerous Republican legislators during the 2016 campaign.
It is hard to describe in measured tones the destructive impact the AHCA would have on West Virginia, starting with the fact that 175,000 of us would be rendered without health insurance by the stroke of a pen. However, Rep. Alex Mooney (WV 2nd) voted in favor of this law. How could this have happened?

Imagining A Fair Distribution of Wealth and Income

Many have said that wealth and income inequality is the most serious long-term problem facing our country. So I invite you to play this thought game. Imagine that you are in a position to decide how wealth should be distributed and, further, that you can decide what rules will apply to the distribution of future income. Your objective is to devise the fairest system that will allow our economy to prosper and best ensure the long-term stability of our democracy. What will you do?

Bank Regulation and Bubbles

The bubbles referred to here aren’t in Champagne or a luxurious bath. They are the rapid inflation of value in an asset class – maybe stocks or single-family homes – to unsustainable levels inevitably followed by rapid, uncontrolled deflation. The unmistakable pop. Those my age have muddled through a number of these bubbles. There was the incredible run-up in value of tech stocks in the 1990s. Then came the sub-prime mortgage lending bubble that popped in 2007.

Bubbles are important to consider these days because a central brake on the conduct of banks in contributing to bubbles, called the Dodd-Frank Act, is under attack by the de-regulators in Congress. Banks and bankers provide a crucial function in our economy. We need them to extend credit, which is the lubricant of the economy, but to do so in a prudent manner. Unfortunately, like most every industry, the banking industry is not self-regulating. Left to govern itself completely, the industry will engage in excessive and risky behavior. This has happened time and again and is just the nature of things.

Do Tax Cuts Lead to Economic Growth?

Budget season in Charleston and Washington, D.C. has once again presented the spectacle of competing tax philosophies. Conservatives argue for cutting taxes as a way to unleash economic growth and job creation. They assert that high taxes discourage the most creative class from economic activity that will ultimately raise all boats. Liberals and progressives, on the other hand, believe that tax cuts unfairly benefit the rich and eliminate revenues that are required for programs that secure a just society. They further argue that tax cuts do not stimulate economic growth in the long term and point out that some jurisdictions with the highest tax rates in the country and the world also have the highest rates of growth. Who is right?

Rep. Alex Mooney Ignores the Panhandle’s Economic Needs

Let’s face it. Panhandle voters did themselves no favor when they elected Alex Mooney as West Virginia’s 2nd District Congressman. Characteristics we’d like to see in a Congressman – independence of thought, sensitivity to constituent needs, flexibility in problem solving – appear to be lacking in Rep. Mooney. His actions and statements show him to be one dimensional. Whatever outrage President Trump proposes for the environment with the false promise of putting coal miners back to work is just fine by him.

How We Talk About Economic Growth

In the last few years of the Obama administration, The Wall Street Journal relentlessly criticized the administration’s failure to achieve sufficient economic growth. That newspaper complained that Obama’s over-regulated economy was to blame for a GDP growth rate of 2.1% — tepid compared to recoveries in the past. The Journal is, of course, the voice of business people who often favor the conservative agenda of low taxes and lower regulation. But the Journal was on to something. The need for economic growth is hugely important and one thing both conservative business people and progressives should be able to agree on.

Replacing West Virginia’s Income Tax with a Consumption Tax Promises Huge New Deficits for the Future

West Virginia Senate Bill 335, now pending before the Senate Select Committee on Tax Reform, would phase out West Virginia’s income tax and impose an 8% consumption tax on a broad range of transactions. The legislative “findings” that precede SB 335 assert that a major change like this to our tax structure would be both fair and fiscally sound. As to fairness, this assertion is demonstrably false. SB 355 would increase the tax burden on low income and working class taxpayers and give wealthier taxpayers a substantial overall tax break.

In the face of at least a $500 million budget deficit this fiscal year and perhaps a larger one next fiscal year, West Virginia is in dire need of a tax plan that will grow long-term, stable revenues. Unfortunately, SB 335 would at best provide only temporary revenue relief and portends mounting future budget deficits. This revolutionary change to our tax structure would be bad law and worse policy.

Eliminating the Income Tax and Creating a New Consumption Tax: Bad Law and Worse Policy

Mischief is well on its way to becoming law in West Virginia. The Republican-controlled Senate Select Committee on Tax Reform is about to propose to the full Senate the passage of SB 335, which would phase out the state income tax and transform the current 6% sales tax into a broader 8% consumption tax. The conceptual basis for the proposed law is that the state provides the marketplace in which sales can take place so that vendors and purchasers who engage in transactions should be required to pay for the privilege of using that marketplace. If that silliness weren’t enough, the Bill’s legislative findings provide the following gem of a non sequitur. “The Legislature further finds that, in the free market system, the best judge of a purchaser’s ability to pay, for the purchase of the goods and services, is the purchaser, and, thus a broad-based consumption tax is firmly based on that principle of sound and fair taxation.” There is nothing sound or fair about this revolutionary change in West Virginia’s tax structure and it should be stopped in its tracks.

Republican Senators Propose Replacing West Virginia’s Income Tax with A Higher New Sales Tax

Only nine states in the nation have no state income tax. However, there is considerable support in the West Virginia Senate to phase out our income tax completely by 2021 and replace lost revenue by raising the state’s sales tax to 8% from 6% and eliminating many sales tax exemptions. The effort in the Senate is being led by Sen. Robert Karnes (R-Upshur, 11) sponsor of SB 335. If the Bill in its present form is enacted, West Virginians would soon begin paying sales taxes on new items such as groceries, internet streaming services, haircuts, professional services, and more. The Bill is co-sponsored by eighteen other Republican Senators, including Panhandle Senators Craig Blair (R-Berkeley, 15) and Charles Trump (R-Morgan, 15).