CHARLESTON, W.Va. (AP) – With West Virginia on the verge of losing another seat in Congress due to the steady decline in population, Republican lawmakers are convinced that massive income tax cuts are the key to reversing the trend. But figuring out how to do it without harming the most vulnerable in the state or massively piercing the budget has proven complicated.
An effort to reach a compromise on how to pay the tax cut hit a major hurdle on Friday.
The weekend that the legislative session is due to conclude, Republican Gov. Jim Justice said the House of Representatives will not accept his bill, which narrowly garnered approval in the Senate.
“It will surely close the door for now,” justice told reporters on Friday, adding that it could call on lawmakers again to take it on. “I heard the door very loud when the House said we wouldn’t take it.”
Although the United States has doubled its population over the past seven decades, West Virginia has moved in the other direction. Closely following the long-term decline of the coal industry, it is the only state in the country with fewer residents than in 1950. U.S. 2020 census figures are expected to be released by the end of this month, they will reduce West Virginia seats in the U.S. home from three to two.
For weeks, Justice and other Republicans said a pandemic that has devastated some state budgets highlighted the positive side of their state. They say its high mountain views, open landscape and low cost of living have given the state a unique feature in the generation to attract new residents thanks to the attraction of lower taxes.
“The whole world is watching us right now,” Republican Gov. Jim Justice said this week. “There’s a giant emergency.”
Justice assaulted House Republicans to effectively kill the bill. He promised to launch a “road show” to tempt the state by announcing its income tax proposal. He said he could convene a special legislative session later this year.
Despite the rule of a party in the state, Justice has struggled to convince some of its fellow Republicans of what a big tax cut should look like. Many say a state that has long faced economic hardship should be careful to raise sales tax or take other measures that could harm its most vulnerable people.
Critics had said leaders are embarking on a population growth experiment that is likely to lead to cuts in education and social services in one of the country’s poorest states. The latest plan passed by the Senate after weeks of fights would reduce the income tax by 40% and increase the sales tax from 6% to 8%, which would be the highest in the country. The court initially sought a 60% reduction in income tax.
It also includes a tax increase rate for energy companies and the services sector. A controversial food tax was withdrawn from the Senate bill after the governor called him a “showstopper.”
In an interview before his bill stalled, Justice said the state is in a position to win with a cut in income tax due to the state’s proximity to the east coast and the cores. of population.
“And if you don’t believe this will lead the population to the state of West Virginia, you will be completely out of your mind,” Justice said.
The population of West Virginia has declined by 11% since 1950, when it peaked at just over 2 million residents and its economy sang in the coal mines.
Experts say there is no consensus on whether low taxes drive population growth.
“There is no credible evidence to prove it,” said Kim Rueben, director of the state and local financial initiative at the Urban-Brookings Fiscal Policy Center. He said taxes may be a factor driving businesses and residents, but he is not the only one.
“We’re putting a lot of our eggs in this basket, that this will grow our population, that growth will help pay for the cuts,” said Sean O’Leary, a senior policy analyst at the West Virginia Center on Budget & Policy, who has been critical of the proposal.
Jared Walczak, of the Washington-based Tax Foundation, a right-wing think tank, points to nine states that have no income taxes, saying “there’s a real attraction.”
But he added that “there is no silver bullet in taxes either. The aim is to grow the economy. ” And he warned against overly rosy estimates: “Sometimes it’s easy to get carried away by what the effects will be.”
On Good Friday, about two dozen people outside the state Capitol in Charleston held placards and spoke out against the legislature’s proposals, which propose cuts to higher education.
“It is immoral, inhumane and forbidden to line our pockets with the bowels of the poor,” said the Rev. Ron English, president of the Charleston NAACP.
The income tax collects about 40% of state revenue, leaving the Republican Party’s majority in the state house mired in disagreements over how to balance future budgets. The more conservative members wanted deep cuts in spending and opposed any increase in taxes on energy companies.
A businessman with coal investments, Justice has said companies can afford to “throw in a few cents more”, while critics of his party said the declining industry has suffered enough pain.
The Senate passed its bill 18-16 Wednesday afternoon after five Republicans joined the 11 Democrats to vote against it.
A former Democrat, Justice has rejected the tax cut if it means “incredibly reloading those who are struggling the most.”
But a luxury tax on any item that cost at least $ 5,000 defended by the governor did not reach the Senate version. Republican Senate President Craig Blair had initially indicated he was open to the idea at a compromise meeting Monday.
Blair represents Berkeley County, a bright growth point in the eastern part of the state. Its largest city, Martinsburg, is approximately 1.5 hours from Washington, DC, and the county is bordered by Virginia and Maryland.
Blair and other West Virginia Republicans have the vision to attract new residents and their spending habits to settle a little further west. And their hope, if they can negotiate a new commitment, is that the prospect of paying little or no income tax is just what will attract them there.