Paper or Plastic?

Remember when grocery clerks would ask this question at the checkout counter? Now you practically have to leap over the counter to prevent your groceries from immediately going into plastic bags. I have always assumed that plastic bags became the grocery industry’s packaging of choice because of the cost savings to the grocers. This is basically true. I have also assumed that paper bags are both biodegradable in landfills and recyclable into other products, while plastic bags are not biodegradable and rarely recycled. But going beneath these assumptions a little further, the environmentally sound choice between paper and plastic bags is not at all clear.

Plastic bags started to appear nationwide in the 1970s and soon captured 80% of the bag market. The principal grocers in Jefferson County – Food Lion, Martins and Walmart all default to plastic bags at the checkout counter. Paper bags are available only on request at Food Lion and Martins, which are both owned by the Dutch company Ahold Delhaize. Walmart does not offer paper grocery bags at all. One won’t find any explanation of the default to plastic bags on the websites of these chains.

All the chains offer reusable bags for sale at around a dollar a pop, and these are probably a better alternative than either paper or plastic bags. But even this turns out to be debatable depending on what they are made from and how many times they are used. Most of these reusable bags are woven plastic of some sort.

There are several factors to consider when deciding whether paper or plastic bags are more environmentally friendly. First, whether the raw materials that go into the manufacture of the bag are renewable. Next, how much electricity and water are used to produce them and how much greenhouse gas is emitted in each manufacturing process. Then how readily each type of bag can be recycled. Finally, how biodegradable each type of bag is at the end of its life cycle.

On the question of renewability of resources, paper bags are the clear winner. They are made from trees. Paper bag manufacturers do not typically use trees from Amazon rain forests, but rather tree farms of fast growing species. While they are growing these trees capture carbon. Plastic bags on the other hand are made from petroleum, which is a non-renewable resource that produces greenhouse gas when burned.

But when considering the use of resources and the release of greenhouse gas in the manufacturing process, plastic bags are the clear winner.  Making a paper bag consumes four times as much energy and three times as much water as making a plastic bag.  And because 1000 paper bags weigh over nine times the same number of plastic bags, transporting them also consumes more energy.

It is difficult to pin down exactly how much more greenhouse gas is emitted by the manufacture of paper bags than plastic bags. But it is a certainty that paper bag manufacturing is dirtier. The Sierra Club reports that you have to reuse a paper bag four times to reduce its carbon footprint to that of a plastic bag. Another study from 2008 asserts that paper bag manufacturing emits 80% more of this gas. A plastic bag manufacturer asserts that “solids” emitted into the air in the manufacture of paper bags is roughly twice what is emitted in the manufacture of a plastic bag.

The question of recycling further adds to the muddle. While paper bags can be recycled into other paper bags, the recycling process is inefficient, often taking more energy than it would to make a new bag. Furthermore, it takes about 90% more energy to recycle a pound of paper than a pound of plastic. But plastic bags are a recycling nightmare – most curbside recycling operations are not capable of recycling these bags because the thin plastic melts and fouls the machinery. It is estimated that only 12% of plastic bags are recycled.

So plastic bags often end up in landfills, where they can sit for 500 to 1000 years.  And plastic bags don’t ever “biodegrade.” Instead they “photodegrade” when exposed to light into smaller plastic particles. The more serious problem with plastic bags is that they don’t end up being disposed of properly but end up as litter. They are everywhere, fouling land and water. Plastic waste is deceptive to birds and mammals, who often mistake it for food. This would lead you to think that paper is the better choice. But here is the big surprise. A paper bag that ends up in a landfill does not biodegrade much faster than a plastic one photodegrades.

So perhaps the way to avoid this bag conundrum is not to use either type of single-use bag. The reusable bags offered for sale by grocery stores are a good option – if you use them long enough.  Heavier reusable plastic bags and cotton bags also have the freight of energy and resource consumption in their manufacture and their own greenhouse gas emission problems.  A heavy-duty plastic bag must be used five times to reduce its carbon footprint to that of a single-use plastic bag. A reusable cotton bag must be used 173 times.

There might also be a political solution to the problem. Eight states—California, Connecticut, Delaware, Hawaii, Maine, New York, Oregon and Vermont—have completely banned single-use plastic bags. Some cities and localities have also instituted bans, including Montgomery County, Maryland. Jefferson County Delegates John Doyle and Sammi Brown introduced legislation in the 2019 Legislature that would ban single-use plastic bags in West Virginia. The legislation was referred to committee, where it awaits some sort of action in the next session.

Most likely, however, we will have to change our behavior voluntarily. That’s not to say we couldn’t use a nudge. The German grocer Aldi, which is a small player in the market, provides that nudge. That chain will happily sell you a plastic or paper bag for about 10 cents each. Aldi claims this saves them money that they return to customers in the form of lower prices. Perhaps.

But there is no doubt that Aldi’s price on single use bags acts as a tax with the predictable result of encouraging shoppers to come up with their own bags or reuse bags they have previously purchased at Aldi or elsewhere. While this approach doesn’t completely eliminate the problems associated with single-use bags, it gets us moving in the right direction without government intervention. My conservative friends like this.

Death By A Thousand Cuts

The West Virginia Legislature began its main 2019 session on January, 9, 2019. All bills introduced in 2018 that were not then acted upon were re-introduced on the first day of this session. New legislative proposals have also been introduced early in this session. A review of both categories introduced in the House and Senate shows that there are several serious attempts to deal with the state’s problems.

But it also shows that many legislators are in love with tax exemptions and credits, which benefit one class of taxpayer and disadvantage everyone else. Sometimes these proposals have merit, but taken cumulatively they show the Legislature’s willingness to bleed our government of the revenue required for it to function effectively, drop by drop.

Legislators from both parties have proposed tax exemptions or credits, although Republicans have done so by a margin of roughly three to one. Here are some of the many proposals:

  • To exempt law enforcement officers from the payment of personal property tax (HB 2075);
  • To reduce the federal adjusted gross income figure used in West Virginia tax calculations for volunteer fire department and rescue squad members (HB 2208);
  • To exempt firefighters and volunteer firefighters from the payment of income tax, and real and personal property taxes (HB 2403)
  • To permit honorably discharged veterans to hunt, trap and fish without a license (HB 2030);
  • To exempt all motor vehicles from personal property tax (HB 2094);
  • To exempt the pension benefits of Department of Natural Resources police officers from state income tax (SB 12);
  • To exempt income earned by primary and secondary school teachers from personal income tax (HB 2370); and
  • To establish an income tax credit for practicing physicians who locate to West Virginia (SB 80).

For the last several years, this state has struggled with large budget deficits created because in earlier periods, when coal severance revenues were high, we reduced or eliminated other taxes. Among these were the business franchise tax and a reduction in the corporate income tax. Then the coal market, as it always does, went bust. We are now again operating with a surplus from an improved coal market and revenues from gas pipeline construction. But these sources of revenue are not permanent. Tax exemptions and credits, on the other hand, often become permanent.

Effective government costs money. Nobody likes paying taxes, but many of us like even less the failure of our government to create a successful, modern state that we don’t have to apologize for. Jim Justice is right about one thing – we are all tired of being 50th. Yet our tax choices don’t reflect an understanding of how to change this.

I am certain that cogent supporting arguments can be made by the legislative sponsors of each of the proposed exemptions and credits mentioned above. And it is difficult for opponents to argue that, say, school teachers aren’t worthy of tax relief. That sort of debate, though, is limited to the worthiness of the constituency to be favored.

What is missing is an analysis of the opportunity cost of granting exemptions and credits. What more important thing would we be able to do with the money we propose to confer on teachers or DNR police officers? There is very little of this analysis in the Legislature beyond the legislative fiscal notes, which are little more than a bookkeeping of what a proposal might cost. These fiscal notes are routinely ignored. You can be sure, however, that every nick in the general revenue fund created by a tax exemption or credit is ultimately felt somewhere else in the budgetary process.

This is not to say that tax exemptions and credits can’t be useful in achieving important policy goals, so long as they rationally fit those goals and are not one-off gifts to a particular constituency. Some of the recent legislative proposals fit well and seem worthy of enactment. For example, a refundable state earned income tax credit of 50% of the existing federal earned income credit. (HB 2108). This credit would further supplement the incomes of low and moderate income working adults. Doing that would increase the attractiveness of work and reduce the need for other public benefits like food stamps.

The idea of raising taxes is like the third rail in West Virginia politics. Nobody in the Legislature wants to touch it for fear of being punished by voters. But maybe we can be more careful about “spending” the revenues we do have on tax benefits for narrow constituencies. One way to do this is to resist the temptation to open any more small fiscal wounds in the body politic for the sake of momentary political benefit.

Going through all the bills that have been introduced in the Legislature so far, I came upon another idea. In each of the last two sessions, a bill has been introduced in the Senate proposing a five year sunset period for all tax credits in the Code (SB 23 and SB 48). Now that is a breath of fresh air.

 

The West Virginia Legislature Fails Its Budget Responsibility

“Do Your Job!” This was a constant refrain heard from the thousands of citizens, many of them teachers, who filled the halls of the state capitol in late February and early March.

They were calling for investment in public education, and for decent salaries for themselves and thousands of other seriously underpaid public employees. The Legislature was dragged kicking and screaming into granting an average 5% raise.

This raise was critically important. But there is another critically important job the Legislature failed to do.

By essentially “rubber stamping” the proposed budget sent to it by the Governor, the Legislature failed to exercise proper stewardship of the public’s money. When it comes to the single most important document the Legislature produces each year, the State Budget, the Legislature did not do its job.

As to my bona fides, I served on the House of Delegates Finance Committee for 19 years (as Vice Chair for 10 years). Later, I was Deputy Secretary of Revenue for 3 years. I have learned the budget process from both the legislative and executive points of view.

Under our state constitution, it is the Governor’s responsibility to propose a budget. It is the responsibility of the Legislature to enact a budget. We on the House Finance Committee took that responsibility seriously and every year we went through the Governor’s proposal carefully, looking for places to economize.

Each of the members of the House Finance Committee was assigned individually to the proposed budget for one or more executive branch agencies to find money that might be cut or used elsewhere. It took us the first 30 days of each annual Regular Session to gather the information and about the next 20 days to compile and analyze it. We would make dozens of changes, sometimes over a hundred, to the Governor’s original proposal. When we reported our completed budget to the House floor during the last week of the session, we were confident that we had done our job up to that point.

But the job wasn’t finished. The Senate Finance Committee would send its budget to the Senate floor at the same time. A Budget Conference Committee for the two chambers would begin meeting as soon as the regular 60-day session was finished. It would usually take between five and seven days to finish. The Governor was always invited into the discussions. I served on this Committee for twelve straight years. The result would be a budget thoroughly vetted.

But that did not happen this year.

In recent years the Legislature has stopped being thorough in analyzing the Governor’s proposed budget. This year the Legislature didn’t even appoint a Budget Conference Committee to discuss ways to improve the budget.

This year’s final budget (FY 2019) included fewer than a dozen changes from the Governor’s proposal. And most of those changes were dictated by the decision (unanticipated when the Governor presented his proposed budget) to grant that 5% pay raise, which cost the state’s coffers about $150 million.

Either our present Governor is the smartest person ever to occupy the office, or the Legislature punted. I think the Legislature abdicated its responsibility to vet the governor’s budget proposal thoroughly. This was fiscally irresponsible.

The West Virginia Constitution permits the Governor to extend the Regular Session for as long as it takes to finish the budget. This is called the Extension of the Regular Session and is different than the Special Session that was required for the FY 2018 budget.  Each day of an extended regular session costs the state approximately $20,000. If this extension averages six days that would cost the taxpayers approximately $120,000. If that work can save at least $500,000 I argue it’s worth the expense. Every year I was on the Budget Conference Committee we saved at least several million dollars.

Because of this work we were able to significantly pay down the unfunded liabilities of the workers’ compensation fund and the various public employee retirement funds, and to establish the rainy day fund. We stabilized the public employee health care program, then called PEIB and now PEIA. The system was so behind in its payments in the 1990’s that medical providers were refusing to see state employees.

Through careful work and negotiation, West Virginia — a financial basket case in 1992 — became recognized as one of the half dozen most fiscally responsible states in the Union by 2012 when I left the Legislature. Our bond ratings were “junk” status in 1992, but had risen so much by 2012 that some were the highest rating (aaa-plus).

In the last four years the so-called “fiscal conservatives” in the Republican Party who lead the Legislature have raided our rainy day fund several times and have overseen a drop in our bond ratings. They have also slowed down paying off some unfunded liabilities. In my view this is fiscal irresponsibility. Their lack of budget scrutiny is another example of irresponsibility.

John Doyle resides in Shepherdstown. He is a Democratic candidate for the House of Delegates from the 67th District.

Panhandle Legislators Lead West Virginia’s “Bad Idea Machine”

Delegate Mike Pushkin, who represents Charleston’s East End in the House of Delegates, once quipped that the West Virginia Legislature is a “bad idea machine.” Our Eastern Panhandle delegation contains some of the leaders, if that is the proper term, in generating bad ideas. I have recently written that Sen. Patricia Rucker has sponsored a host of bills that advance her far right ideology and religious beliefs. Most notably, these include her sponsorship of Senate Joint Resolution 12 that would put on the November 2018 ballot a proposed amendment to the West Virginia Constitution declaring that nothing in that Constitution creates a right to abortion. Not to be outdone, her Panhandle colleagues in the House of Delegates have introduced pro-gun and anti-public school legislation that give Sen. Rucker a run for her money.

The recent teacher strike has highlighted how badly our government has allowed the state’s public schools to deteriorate. Until the settlement announced on February 27, 2018 is implemented, teacher salaries in West Virginia rank 48th out of 51 state jurisdictions. We are surrounded by states that value their teachers more. And yet the poor-mouthing by Governor Justice about the state’s inability to raise teacher pay was obviously just posturing in light of the 5% bump teachers will now receive.

If there is any truth to the “inability to pay” argument, that inability has been created by a decade of corporate tax cutting that has blown huge holes in the budget. Over this period, West Virginia has relentlessly cut corporate taxes. In the period 2007 to 2014, the Legislature reduced the business franchise tax from .7% to zero and reduced the corporate net income tax rate from 9% to 6.5%.

In the midst of a courageous walkout by teachers in all 55 counties, the Legislature was primed to hand business interests yet another tax cut in the form of eliminating the business inventory tax and may yet do so. Tax cuts for business are nothing more than a choice on how to “spend” revenues, in this case by forgoing revenue that otherwise would be collected and available. Until its hand was forced by the teachers, the Legislature was prepared to spend a big pile of cash on corporations instead of quality education.

But there is reason to question whether our Panhandle Delegates care about public education at all. Del. Michael Folk (R-Berkeley, 63) has introduced HB 2031, which would eliminate state payment for teacher training or professional development, and HB 2094, which would give home school parents a $100 tax credit per student. This tax credit would begin the process of permitting home school parents not only to opt out of public education but to avoid paying for it like everyone else. This folks is what libertarians want not only when it comes to public education but all government services.

When it comes to guns, our Panhandle Delegates are second to none in the bad idea category. Here Del. Folk fully reveals his extreme views. He sponsored HB 2311, which would declare any federal or local laws or regulations that attempt to tax, regulate or restrict gun ownership void and unenforceable in West Virginia.  He clearly needs some re-education about the Supremacy Clause of the U.S. Constitution.

The recent horrible school shootings have perhaps caused us to forget the equally horrible workplace shootings of the near past.  Del. Saira Blair (R-Berkeley, 59) may be too young to remember what “going Postal” meant to America but a few short years ago.  She has co-sponsored HB 4187, named the Business Liability Protection Act, but referred to as the Parking Lot Gun Act.  It would allow an employee, contractor or visitor to a business that bans guns on its property to nonetheless keep a gun locked up securely in their cars while parked in the business parking lot. The business would even be prohibited from inquiring whether a gun is in the car. This bill has now passed the House of Delegates.

In Committee, Del. Riley Moore (R-Jefferson, 67) offered an amendment to HB 4187 that was favored by the NRA to retain the full scope of this bad idea against efforts to soften it. State Chamber of Commerce President Steve Roberts, West Virginia Manufacturers Association President Rebecca McPhail and David Rosier, general manager of administration for Toyota’s Buffalo plant, have all come out against HB 4187, saying it would make their workplaces less safe.

Elections have consequences. The 2016 House of Delegates election produced this crop of Republican legislators and we are now truly living with the consequences. Fortunately, the winds of change are swirling.

Blaming The Victim: West Virginia’s Flirtation With Medicaid Work Requirements

It was my intention when launching this blog to support economic policies in West Virginia that actually spread prosperity to all citizens. The wealthy don’t seem to need help ensuring they get a big plate full at the prosperity table. It is the less fortunate who need help. But in this long Republican winter, avoiding policies that hurt the less fortunate is really a full time job.

Two ideas popular in West Virginia and the nation today fuel this problem. First is the Koch-funded libertarian idea that any expansion of public benefits is a threat to the “liberty” of those who are taxed to pay for it. This is well-documented in Nancy MacLean’s 2017 book Democracy in Chains. Second is the populist notion that people who receive public benefits are somehow lazy and morally at fault for their situation. Both of these factors are on display in the current debate about whether to add work requirements for Medicaid benefits.

Medicaid is a jointly funded federal and state program that helps several categories of low income and disabled people with medical costs. As of 2017, Medicaid provided healthcare coverage to 74 million nationwide (over 23% of the population). Some of the covered categories include children in low-income families, pregnant women, parents of Medicaid-eligible children who meet certain income requirements, and low-income seniors.

Obamacare extended Medicaid eligibility to all U.S. citizens and legal residents with income up to 138% of the federal poverty line, including for the first time adults without dependent children. But as a result of a Supreme Court ruling, states were not required to adopt this expansion in order to receive federal Medicaid funding for previously covered groups. Given its large poor population, West Virginia wisely opted to extend coverage. About 170,000 additional West Virginians became eligible under Medicaid expansion, roughly 9% of the state’s population.

On January 11, 2018, the landscape changed. The Director of the federal Centers for Medicare and Medicaid Services (CMS) issued a letter to all state Medicaid directors inviting them to apply for a waiver that would allow states to require participation in work and other community engagement as a condition for Medicaid eligibility. The policy change is described as “designed to assist states in their efforts to improve Medicaid enrollee health and well-being through incentivizing work and community engagement.” Yes, you read that right. These bureaucrats are asserting that work will make you healthy. They cite studies that link unemployment with depression. Of course, they have it totally backwards – being healthy will enable you to work.

I am inclined to think that CMS’ explanation is a cynical effort to avoid the legal challenges to Medicaid work requirements that have already begun. In the first place, approving work requirement waivers is an about-face – several states attempted this in the past but were denied. They were denied because work requirements for eligibility are contrary to Medicaid’s stated purpose to provide comprehensive healthcare coverage for people below state income thresholds. Administrative agencies cannot lawfully rewrite a statute through adding eligibility requirements that advance other goals (limiting benefits to the “deserving poor”) that are contrary to the purpose of the law. CMS operatives know this, which explains their absurd effort to link work requirements with health.

At the urging of Republican legislators, West Virginia’s Department of Health and Human Resources is now considering work requirements for Medicaid recipients. According to Jeremiah Samples, Deputy Secretary of DHHR, this effort would focus on “able-bodied” people:

We’re trying to empower folks to get out of the system. At the end of the day, the best thing we can do at DHHR for our able-bodied population is to get them into the workforce, without question.

Truth be told, any such requirements would expel recipients from the system, not “empower” them to leave. This is a stick not a carrot. For Medicaid expansion states like West Virginia, any work requirements will have the (intended) effect of reducing the recipient population irrespective of whether those removed remain below the state income threshold.

How would this happen? According to Mr. Samples, the DHHR is reviewing how other states plan to add work requirements. Kentucky’s waiver was the first to be approved by CMS. The Kentucky plan calls for reporting by the recipient every 30 days to verify that he or she is working or involved in some other activity approved by the authorities. Kentucky will disenroll recipients from Medicaid for up to six months if they fail to report changes in income or work status.  Beyond the sheer hassle to the recipient and the possibility of inadvertent noncompliance, this would be yet another layer of red tape and opportunity for error. It would be a system the sole purpose for which is to snag and remove Medicaid recipients who do not repeatedly, month after month, prove their eligibility and worthiness. An aide to Kentucky Governor Blevins says that he expects 95,000 recipients to be removed from Medicaid benefits within five years.

Getting people off benefit rolls and onto employment rolls is a great idea. But West Virginia can’t do this by denying people healthcare. There are several reasons why an “able-bodied” person might be in need of Medicaid that have nothing to do with laziness. A shortage of jobs is one. Being between jobs for over 30 days is another. A mismatch between job requirements and a worker’s skill might be another. Opioid dependency might be involved. In an excellent editorial published on January 25, 2018, The Charleston Gazette put it this way:

How does interruption in coverage improve anything? Or is it just an exercise for the righteous . . . to feel better about themselves? ‘Must work for your healthcare,’ might be a great policy in the perfect imaginary world where ideologists live, but it fails to acknowledge the real circumstances of life in most of West Virginia, both town and country. No doubt that is by design. If people who never liked the Medicaid expansion can dress up their ‘solutions’ as getting tough on the poor and lazy, it sells better than if it is more accurately described as kicking the most vulnerable West Virginia workers, or potential workers.

Eighteen states declined to accept Medicaid expansion funds despite the needs of their populations. This group includes every state in the old Confederacy except Arkansas and Louisiana. But one unintended consequence of the present willingness of CMS to approve Medicaid work requirements is that several of these non-expansion states are now considering participation in the expansion. This may have the ultimate effect of increasing the Medicaid rolls nationwide. But it is a development that will not help expansion states like West Virginia.

Delegate Riley Moore and Business Tax Cuts

On October 19, 2017 Delegate Riley Moore, who represents the Shepherdstown District in the West Virginia House of Delegates, published an opinion piece in the Charleston Daily Mail. The piece urged Congress to pass the Trump “tax reform” bill for the sake of economic growth, particularly in West Virginia. Putting aside that Del. Moore could not have known the details of the Republican tax bill on October 19 because it had not yet been made public, he extolled the virtues of various tax cuts he expected the plan to contain. In particular, Del. Moore is fond of tax cuts for business. His logic is the following. The desirable end result is more economic activity and good jobs for everyone. So far, so good. The means of achieving that desirable end result is to give over a trillion taxpayer dollars to corporations — with no strings attached — and hope that they spend this money in productive ways. What could possibly go wrong with this plan?

Republicans have creative ideas from time to time, and Del. Moore is no exception. He sponsored a bill during the last legislative session that would have created tax credits to stimulate new businesses in West Virginia. But Republicans never want to pay for their creative ideas with new tax revenue. Instead they want to cut into already existing tax revenue that would be available for other useful government work. Tax credits are one way to do this. Tax credits are tax reductions for specific taxpayers who meet the requirements, yet they are still essentially transfers of our public money in exchange for certain taxpayer behavior. Is encouraging this behavior more desirable than some other use for the tax money? The problem is that when these tax credits are proposed it is impossible to identify precisely what government program will be eliminated in exchange, or will suffer for lack of funding. The proponent of the plan doesn’t have to make the case that the tax credit is better than an environmental program, more student loans, or some other worthy project. So the public cannot intelligently answer the question.

Indiscriminate business tax cuts are far worse. Under the Republican world-view, money is best diverted from public uses to private uses. The end result is that government has less and less ability to do what we need it to do. Make no mistake, every dollar that is cut from the taxes of a business is a dollar that we could otherwise use to fund our schools, our healthcare and our public safety. Indiscriminate business tax cuts don’t even pretend to require desirable behaviors from the business like tax credits do. Business tax cuts are just giveaways of our money plain and simple. Today the Wall Street Journal reported that the Trump tax plan in its present House version would permanently reduce the corporate tax rate to 20%, costing $1.5 trillion dollars in lost tax revenue.

Has anyone else noticed that Republicans only seem to be concerned about the deficit and the debt when it is “entitlement” spending programs that are under consideration? True tax reform would shift tax burdens around to be more equitable and streamline administrative procedures. But it would also find new revenues to make up for revenues lost – revenue neutrality. Trump’s tax plan as initially revealed by the House Republican leadership hardly makes an effort to claim revenue neutrality. Paul Ryan and others say that the enormous tax cuts will stimulate growth over the next decade and from this growth new tax revenues will come. No economist will stand up to support this trickle-down baloney. If the so-called “fiscal hawks” in the Republican Party don’t oppose this thinking, then we should all change the channel the next time they complain about spending programs from the Democrats.

Del. Moore’s opinion piece in The Daily Mail also spoke warmly of middle-class tax cuts and on this it is hard to disagree with him. Putting more money in the pockets of those who need a boost is exactly the kind of alternative use for tax revenues that does make sense. It will also boost the economy because middle-class taxpayers will be much more likely to spend their tax cut than the wealthy, who will save any tax cut they get.

But a business is entirely different than a middle-class taxpayer. Sure a business tax cut will free up some money for the business, but what’s to keep that money from being spent on a vacation in the tropics for the owner, or a non-productive use like paying down debt or share repurchases? Writing in the Washington Post, David Lynch notes

Several companies already have indicated that they will use excess funds to pay off debt, increase dividend payments or repurchase their own shares rather than create new jobs or raise wages. On Wall Street, the consensus is that workers will be the last in line behind shareholders, creditors and investment bankers when the extra corporate cash is distributed.

The Republican tax plan contains absolutely no requirement that a business use the tax cut for investments that will create jobs. If Del. Moore wants to have his house painted, you can be sure he doesn’t just send checks to all the painters in town in hopes that one will show up at his house.

If this country is going to give away its tax revenue to corporations for the goals of generating economic activity and creating jobs, there are ways to ensure that the money is employed to these purposes. One need look no further than the way the money from the recent West Virginia road bond referendum will be used. The goals were increased economic activity in the short term and more jobs for West Virginians. There is a linear connection between these goals and the means chosen to achieve them. Projects will begin in the current fiscal year all over the state. The West Virginia Jobs Act requires that contractors receiving these funds employ a workforce of at least 75% West Virginia residents and a proposed amendment introduced at the recent Extraordinary Session of the Legislature would put some teeth into this requirement. Of course, there can always be slips between the cup and lip. But this arrangement creates more confidence that our tax money will be used for the desired purpose than trillion dollar business tax cuts with no strings attached.

Partisan Gerrymandering and the Constitution

On October 3, 2017, the United States Supreme Court will hear arguments in the case of Gill v. Whitford. This case raises the question of whether gross partisan gerrymandering by the Wisconsin state legislature in creating state voting districts violates any provision of the U.S. Constitution. Partisan gerrymandering – intentionally drawing voting district lines to favor one party or the other – has seen a sharp increase since the redistricting that followed the 2010 census. Many observers believe that partisan gerrymandering is to blame for much of the gridlock in Congress and the state legislatures because highly partisan districts elect highly partisan representatives who have no political room to compromise. The old legal wisdom is that for every wrong there is a remedy, so you would expect that this case would be a slam-dunk for those challenging the Wisconsin redistricting in the Supreme Court. But you would be wrong.

Appendix AFirst, some basics. The constitutions of each state determine the number of state Senators and Delegates assigned to voting districts and the apportionment of the state’s population into those districts. In West Virginia the House of Delegates is composed of a fixed 100 members, each theoretically representing 1/100 of the state’s population. But instead of there being 100 districts, our legislature has created 67 districts some of which elect multiple Delegates. (Appendix A). All Delegates face re-election every two years.

There are two Senators from each of seventeen senatorial districts for a total of thirty four. According to the West Virginia Constitution, senatorial districts “shall be compact, formed of contiguous territory, bounded by county lines, and, as nearly as possible, equal in population, to be ascertained by the census of the United States.” (Appendix B). There is no such language relating to House districts. Senate terms are four years and elections are staggered so that a portion of senators faces re-election every two years.

Appendix BState legislatures also draw each state’s Congressional district boundaries, which must be revisited every ten years immediately after the census. West Virginia has had three Congressional districts for several decades, but their boundaries have changed slightly over time to reflect the shift in population to the Eastern Panhandle and Monongalia County. The U.S. Constitution and its Amendments determine who can vote in federal elections. But as for how districts are constituted, it merely says that “Representatives . . . shall be apportioned among the several States which may be included within this Union, according to their respective numbers” and that “the number of Representatives shall not exceed one for every thirty Thousand.”

The basic requirement of Congressional apportionment that each district have an approximately equal population is consistent with the 5th Amendment’s promise of equal protection of the law. For example, if District A has a population of 750,000 and District B has a population of 800,000, then voters in B have an incrementally less powerful vote. That same principle was made applicable to the states by the 14th Amendment, ratified after the Civil War. In a series of cases in the 1960s, the Supreme Court announced that “equal protection” in the context of state legislative district apportionment meant “one person, one vote.” For example, in Reynolds v. Sims (1964), the Court said:

To the extent that a citizen’s right to vote is debased, he is that much less a citizen. The fact that an individual lives here or there is not a legitimate reason for overweighting or diluting the efficacy of his vote. . . . By holding that as a federal constitutional requisite both houses of a state legislature must be apportioned on a population basis, we mean that the Equal Protection Clause requires that a State make an honest and good faith effort to construct districts, in both houses of its legislature, as nearly of equal population as is practicable.

But if all equal protection requires is districts of equal population, there is still an infinite number of ways to divide a state’s population into roughly equal segments. The development of software that predicts the likely election consequences of moving even small groups of voters from one district to another has tempted legislatures to find just those configurations that maximize the likely future success of the party in power, while still satisfying the equal population requirement. The Republican legislators in Wisconsin sorted through multiple proposed district maps with the use of redistricting software and the help of political science experts until they found the one they believed would best ensure their control of the legislature for an entire decade even if they were to lose the popular state-wide vote.

The challengers to this plan in Wisconsin were numerous individuals and groups acting on behalf of Democrat voters in the state. There is a subtle but significant difference between protecting an individual voter from the dilution of her vote and protecting a subset of the whole voting population – registered Democrats – from being deprived of a proportionately equal chance to elect Democrat candidates. This difference raises the question of whether the Equal Protection Clause even applies to state-wide voter groups? If it does, are all such groups entitled to equal protection? If Democrats and Republicans as distinct voter groups are entitled to equal protection, how about the Green Party or the American Nazi Party? This is one thing that makes the issues raised in the Wisconsin case so difficult for courts to get their minds around.

There is even a more fundamental legal question the Court must answer before deciding whether the Equal Protection Clause prevents partisan gerrymandering. That question is “justiciability” – whether a clear rule can be found delineating what is acceptable from unacceptable in the drawing of district boundaries and whether courts should step into the political arena at all in view of the separation of powers. In my next post, I will explain why partisan gerrymandering greatly intensified after the Supreme Court’s last pronouncement on these issues in 2010, and where the law now stands on the issues presented in the Wisconsin case.

 

The Old Bait And Switch

West Virginia voters have just been made the victims of a fraud — we were sold one thing by Jim Justice and he has now delivered another. It did not take him long to reveal the fraud, suggesting that it was intended from the beginning.  In Huntington with Donald Trump on August 3, 2017, Justice announced that he was switching parties from Democrat to Republican. Recall that this is a man who switched party affiliations from Republican to Democrat in February 2015 so he could run for Governor on the Democrat ticket. He was elected in November 2016, a mere nine months before switching back to Republican again. In front of a cheering crowd who had booed him just moments before, Justice explained that “I just can’t help you anymore being a Democrat governor.” This bait and switch had far less to do with Justice’s desire to be an effective governor than with his lack of character.

It’s easy to dispose of Justice’s claim that being a Democrat governor limited his effectiveness during the recent budget fiasco. When his proposed budgets were first introduced to the Legislature they involved generating new revenues and preserving the spending necessary to retain the state’s social fabric. He got wide support for this from the Democrats but little support from the Republicans. As the debate wore on, however, Justice abandoned the progressive aspects of his budget and began caucusing with the far-right Senate Republicans in their effort to cut income taxes.

These income tax cuts were not only opposed by Democrats, but also by House Republicans. Since Republicans control the House of Delegates, it was Justice’s inability to deal with them that ultimately frustrated him. But actually being a registered Republican would not have improved his effectiveness.  He had already taken up with the right fringe in the Senate and begun to act like a Republican. Instead it was his poor policy choices, frequent course reversals and shallowness that caused his ineffectiveness. He has poor political instincts and is simply not a leader.

There is no question, however, that Justice’s switch of party affiliation has damaged the already lame Democrat party. That party has been able to elect only one Democrat out of five Congressional representatives and now all in the state’s elected leadership are Republican. Sen. Joe Manchin, who is reputed to have recruited Justice to switch parties to Democrat and run for governor, looks like a fool. So does current State Democrat Party Chair Belinda Biafore, who claims that Justice duped her, not to mention former Democrat Party Chair Nick Casey, who is Justice’s Chief of Staff. Calls for a shake-up of Democrat party leadership have already begun. Former West Virginia Senate President Jeff Kessler, a respected Democrat who lost to Justice in the 2016 primary, said “It’s time for a change at the top . . . They need some new leadership at the Democrat chair.”

Nobody looks good in this. The Republicans have their own problems welcoming back to their party a governor they were happy to lampoon just days ago. The Republican Governor’s Association said in November 2015 that Justice was “a selfish businessman who consistently put his interests before anyone else’s, especially taxpayers.” The West Virginia Republican Party said in July 2017 that “Jim Justice embarrasses our state every single day.” These statements were catalogued by the Democratic Governor’s Association, who are now firing their own invective at Justice when formerly they embraced him. The hypocrisy on both sides of this sad event makes you want to take a shower.

Not all politicians lack character.  One thinks immediately of Sen. John McCain on the Republican side and former President Obama on the Democrat side. But if character is the trait of steadfastness to principle when the going gets tough, Jim Justice has failed us miserably. It is hard even to see what he hopes to gain from this switch of party affiliations. Perhaps he expects larger campaign contributions from Republicans than he raked in from the Democrats whom he deceived in 2016. Maybe he wants to bask in the Mar-A-Lago sun. One thing is certain, though. The question of what he has to gain is the right question to ask.

West Virginia’s Budget Disgrace

The soap opera in Charleston appears to be over. After failing to come together on any meaningful changes for increasing revenues or reforming the tax structure, the Legislature adopted a “bare-bones” budget that cuts more deeply than ever into valuable state programs. This was a default to the lowest common denominator and a failure of statesmanship. It defers many important questions for a later Legislature. One Delegate said that the budget was the result of “complete and utter dysfunction.” The process wasted everyone’s time and money.

While there is blame to go around, this result was the product of opposing positions taken by members of the same political party. Senate Republicans insisted that there would be cuts to personal income taxes or nothing. House Republicans insisted on broadening the sales tax base and were suspicious of income tax cuts in a deficit environment. Week after week neither side moved. The Democrats were impotent on the sidelines and the Governor lurched from one folksy hyperbole to the next, offering some bone-headed proposals of his own. The whole process was a disgrace.

The Legislature gathered in general session knowing in advance that revenues in the state’s General Revenue Fund were projected to fall short of the spending level from last fiscal year. The shortfall was roughly $500 million. There has been agreement on both sides of the aisle that tax reform will be necessary for West Virginia to stabilize and increase revenues and avoid volatility in our budgeting.

But for many Republicans, particularly a Senate faction led by Robert Karnes (R, Upshur), tax “reform” meant radical reductions to the personal income tax, the largest single source of state revenue. Karnes and his crowd actually think that cutting income tax for wealthy “job creators” will raise revenues.  By allowing these people to keep more of what they make, reasons Karnes, they will leap into action, juicing up business and the economy. This widely debunked nonsense was exposed most recently by the Kansas experience where substantial income tax cuts put the state’s economy into the toilet.

Karnes and the Senate Republicans labored under a false belief that also afflicted House Republicans. It can be reduced to a simple equation: tax = bad. In an environment where we needed more revenue to avoid harmful cuts, only the House Republicans were willing to put their toe into the water to find new revenue sources. Even then, House Republicans wanted to add new items upon which to levy sales taxes rather than raise the tax rate itself, presumably so they could then claim they didn’t raise taxes. They rejected a Senate bill because it “amounted to a tax increase.” The conservative Tax Foundation, which followed the situation in West Virginia closely, said “It would almost be easier to enumerate the taxes the legislature didn’t consider as possible solutions to the budget shortfall over the past few months.”

West Virginia has well-documented problems. On just about any measure of successful governance we are last in the country or very close to it: per capita income, workforce participation rate, educational attainment, health indicators and obesity, opioid addiction. You name it. Governor Justice’s initial proposed budget recognized that important spending on education and social programs had to be retained in order to ensure that we did not become a failed state. But later he seemed to lose his head by aligning himself with Senate Republicans and their income tax cuts, presumably on the theory that even a bad idea is better than no idea. In the end he lost respect from everyone, even members of his own party.

The best summary of the cuts our FY 2018 budget will make versus the spending from FY 2017 (which itself involved cuts from prior years) has been provided by the West Virginia Center on Budget and Policy.   The budget cuts $7.5 million from colleges and universities and $2.5 million from community and technical colleges. Public broadcasting was cut nearly $1 million, the line item for the Division of Culture and History was cut 14%, and the West Virginia Commission on Women, the Division of Educational Performance and the Tobacco Education Program were all completely defunded.

We need some new thinking and new leadership who recognize that good government is expensive and that we cannot cut our way to prosperity. If West Virginia is determined to elect Republicans to majority roles in the House of Delegates and Senate, these public servants need to rise above squabbling among themselves, reject the latest fashion in right-wing economic theory, and a find a way to grow revenues over the long haul. Yes, that might mean even raising taxes, which West Virginians would welcome if we applied the revenue toward solving some of our many problems.

 

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.

June 12 is the sixteenth day of a special session devoted to this project. The extension to allow the conference committee to meet expires on June 13 and if a solution is not reached immediately the tax reform effort may be abandoned entirely. The two opposing camps are the Governor and Senate Republicans — who want to reduce income taxes — and nearly the entire House who want to raise sales tax rates and coverage without reducing income taxes.

Neither approach is progressive. Sales taxes hurt lower and middle income citizens who have no choice but to spend almost all of their income on taxed items. Because income taxes are generally paid more heavily by wealthier citizens, the proposed income tax reductions coupled with the sales tax increases would result in an overall tax decrease for the wealthy but an overall tax increase for lower and middle income taxpayers. According to the West Virginia Center on Budget and Policy, the plan lowers taxes on the top 20% of West Virginia households and increases taxes on the remaining 80 percent of households.

Nevertheless, a sales tax increase seems likely to be in any budget deal. But it is uncertain what the new rate will be. The conference committee is now considering an increase from 6% to 6.5%. Whatever higher rate is chosen, it would be applied to previously untaxed items such as telecommunications services, digital goods, electronic data processing services and health fitness memberships. The 6.5% rate is projected to raise $96 million in FY 2018 and $106 million in FY 2019.

Beyond that, the thinking of the Governor and the Senate Republicans has come unmoored. They want to reduce income taxes by 7% in FY 2018 and in similar amounts staged over coming years. What should trigger these further reductions has been the difficult issue. Senate Republicans have only agreed to this “modest” series of reductions in income tax because opposition to their original proposal was fierce. An income tax reduction is the brain child of Sen. Robert Karnes (R, Upshur), a conservative ideologue, who headed the Senate Select Subcommittee on Tax Reform. You may wonder how a reduction in income tax collections will close the budget gap?

You’ve heard the Republicans’ answer before – tax cuts will lead to more growth and job creation, which will lead to higher tax collections. The problem is this theory has never worked. While there may be some small growth benefit in tax cuts, it never amounts to as much as the tax revenue lost. This played out painfully over a decade in Kansas, which finally abandoned its tax cutting regime by adopting tax increases passed by a Republican legislature over the veto of Republican governor Brownback.

But it is Governor Justice who has gone the furthest into fantasyland. After properly opposing massive spending cuts that would have rendered West Virginia a shell, Justice has gone over to the income tax views of the Senate Republicans in order to get a deal. He defends their position because “just think of how far they’ve come” from their original proposal to cut income taxes 30%. In other words, we should all support a bad proposal because it is not insane like the first one.

Governor Justice has engaged in what can only be described as weak and illogical explanations for his positions. He acknowledges that increasing sales taxes may swamp any benefit low and moderate income taxpayers would get from a reduced income tax. But then referring to that reduction he asks why we wouldn’t want to “give money back to the guy mowing the grass?” When pressed he has further supported the reduced income tax idea by suggesting it would be “a great move for our image and a great move to potentially bring people to our state.” Don’t bother looking for any hard numbers.

Governor Justice also has urged the adoption of a tiered coal severance tax that would generate less tax revenue when coal prices are low and increased revenue when they are high. The net impact would be a $49.9 million reduction in severance tax collections for FY 2018. This proposal is either the result of strong coal industry lobbying or faulty thinking, or perhaps both. Surely other industries in the state with greater economic impact than coal, such as healthcare, would benefit from favored tax treatment. This is just one more example of pandering to extractive industries that do not represent our future.

So in the end, how does Governor Justice believe the budget gap will be closed? He predicts an additional $100 million in tax collections from economic growth that will result from the tiered coal severance tax and his $2.8 billion infrastructure spending plan. This guesswork, called “dynamic scoring,” is so speculative it would make Donald Trump blush. There are easily a hundred ways that this tax revenue could fail to materialize even if the infrastructure plan is pursued. This is why state budgeting based on estimates of economic growth is considered unsound.

Governor Justice once appeared to be the sensible, stable player in the budget and revenue battles. Now he seems to be the chief inmate in the asylum.