Statehouse Beat: What's behind tax reform push?

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Statehouse Beat: What's behind tax reform push?
By Phil Kabler, The Charleston Gazette

Despite its mandate to “aggressively cut taxes” in order to spur economic growth, the first significant meeting of the legislative Select Committee on Fair Taxation seemed more like a solution in search of a problem.

Citing U.S. Census Bureau and Bureau of Economic Analysis reports, Deputy Revenue Secretary Mark Muchow noted that West Virginia’s corporate taxes as a percentage of gross domestic product in fiscal 2014 were 0.3 percent — equal to the national average and lower than every surrounding state but Virginia. Muchow noted the 2014 figures don’t account for the elimination of the business franchise tax, which will knock West Virginia’s percentage down to 0.2 percent, equal with Virginia.

Revenue general counsel Mark Morton also noted that taxes are fairly well down the list of factors companies consider when locating operations, well behind location, availability of markets and availability of a competent, well-trained workforce.

(That Macy’s and Procter & Gamble have or are locating major facilities in West Virginia are probably exhibits A and B to illustrate those points.)

So what’s the real motivation here? Stateline, published by the Pew Charitable Trusts, published an article last week that offered a pretty good insight: “States Debate Who’s Helped, Hurt in Shifting Tax Burdens.”

It notes that a half-dozen predominately Republican-controlled states are considering cutting income taxes, while raising sales and excise taxes, “sparking debate on whether wealthier taxpayers will benefit disproportionately at the expense of those living on lower incomes.”

One of those states is Ohio, where Gov. John Kasich is proposing cutting income taxes 23 percent, and partially offsetting the lost revenue by raising the state sales tax from 5.75 to 6.25 percent.

(The rest of the offset is to come from new investment and job creation, which is sort of the same theory our Legislature used when it cut the corporate net and eliminated the business franchise tax — and has struggled every year since to close the $230 million funding gap created by those tax cuts.)

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Muchow also made the point that it’s difficult to compare tax burdens state-by-state.

With no income tax or sales tax, per se, New Hampshire looks like an attractive model for tax reform — until you get to property taxes.

In New Hampshire, he noted, a resident with a house valued at $60,000 will pay about $5,000 a year in property taxes. The same house in West Virginia — which has the lowest residential property taxes in the U.S. — would run $300/$400 a year in property taxes.

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Presumably, billionaire Jim Justice will be announcing his candidacy for governor today. (Or he’ll become the first person in state history to call together hundreds of supporters, only to disappoint them by taking himself out of the race.)

One astute reader wondered whether Justice’s candidacy will put a damper on GOP participation when West Virginia hosts the National Governors Association summer meeting this July at Justice’s Greenbrier resort.

(On Friday, the state Republican Party put out a statement referring to Justice as an “ultra-liberal billionaire” — which is a good example of why GOP operatives will have such a quandary attacking a Justice campaign. “Ultra-liberal billionaire” is an absurdity along the lines of “godless Pope” or “camera-shy Kardashian.”)

Finally, news of the death of former Delegate Phyllis Rutledge, D-Kanawha, caused me to recall a laugh-out-loud moment from my early days of covering the Legislature.

It was during a long, extended meeting of House and Senate budget conferees (back in the days when the state budget bill was actually deliberated in public).

There was a momentary pause — I believe while copies of an amendment were being handed out — and Sen. Bill Sharpe, D-Lewis (who far pre-dated Political Correctness), turned to Rutledge and said, “Phyllis, we’ve been here so long, you’re starting to look good to me.”

Rutledge didn’t miss a beat, shooting back that even if the meeting went on forever, Sen. Sharpe would never look good to her.

It occurred to me that in 25-odd years, the Legislature has regressed in terms of having powerful women in positions of authority.

In addition to Rutledge, Pat White, D-Kanawha, was chairwoman of the House Health and Human Resources Committee, Jae Spears, D-Randolph, was Senate Government Organization chairwoman, the indomitable Sondra Lucht, D-Berkeley, was Senate Education chairwoman. Not to mention many other influential women legislators of the era, including Thais Blatnik, Charlotte Pritt, Martha Wehrle, Mary Pearl Compton, Vicki Douglas, Nancy Kessell, Deborah Phillips, and Martha Walker.

At the time, the Senate — which could be thought of as the state’s oldest, most exclusive fraternity, had six female members. Currently, that’s down to one, longtime Sen. Donna Boley, R-Pleasants.