Flat budgets by way of tax cuts are increasing costs for families

Gov. Jim Justice’s proposal to cut the state income tax another 5% would reduce state revenues $114 million annually. (Getty Images)

Earlier this month, Gov. Jim Justice announced that legislators have had sufficient time to reach a consensus on his proposal to slash the state’s personal income tax for the third time in 18 months. In reality, the first two rounds of tax cuts have not even been fully phased in yet, and the state is already seeing historic revenue losses alongside major spending needs after years of austerity.

The West Virginia Center on Budget and Policy’s new analysis finds that the change in tax revenues from FY 2023 to FY 2024 — driven in large part by 2023’s tax cuts — was the largest year-over-year revenue decline West Virginia has seen in 25 years, even outpacing the revenue losses during the Great Recession. And with about $310 million annually in already-enacted tax cuts still to be phased in, revenues will continue to drop, making it even more difficult for policymakers to address the state’s significant spending needs. Indeed, the Justice administration’s revenue department expects collections to decline another $500 million this fiscal year (FY 2025) compared with FY 2024.

But revenue losses are more than just numbers on paper — they mean there are fewer dollars to put toward funding for our public schools, health care, infrastructure and other public goods families and businesses rely upon.

The governor’s proposal would reduce state revenues even further — another $114 million annually. Senate Finance Chairman, Republican Eric Tarr described in July what lawmakers would have to do to offset a third reduction in the income tax after years of flat budgets that have already cut public services to the bone: “Either you’re going to have to go in and reduce spending that is so bloody that you can afford that — bloody by, I mean, it is going to be politically challenging and it will be citizen uproar on some of those services… [or] you’ve got to go find a tax somewhere else you’ve got to increase.”

That reality should raise significant concerns for policymakers who are considering the governor’s proposal of another five percent reduction in the personal income tax which, according to an analysis by the Institute for Taxation and Economic Policy (ITEP), would amount to about $1/week (or $53/year) for the average West Virginia household in their districts; meanwhile, the top 1% of wealthiest West Virginians would see about $2,100/year.

How much more bloody could the state budget become in exchange for $1/week for the average West Virginia family? We have already seen the impacts of the first round of tax cuts on state-funded programs: dozens of child care centers and family care homes closed already this year, leading to hundreds of families losing access to the child care they need in order to work.

New data shows that West Virginia ranks last in the country for teacher pay even after recent pay raises (though those were often consumed by increased PEIA costs). Teacher pay has a significant impact on families with children in our public schools, particularly those in border counties where teachers can often drive just a few miles to see their salaries jump dramatically or even double.

Emergency Medical Services (EMS) providers are warning that their response times are being hindered by a lack of steady funding, which has had catastrophic and even deadly impacts in rural parts of the state. In addition to the literal life or death implications of the issue, emergency response times also impact the cost of homeowners insurance premiums.

Each of these examples are a result of policy choices to prioritize income tax cuts — two-thirds of which have gone to the wealthiest 20 percent of households — over investing in public services that support all families and grow our economy.

For families who have lost their child care provider or are at risk of losing their child care subsidy, $1 per week won’t mean much. Nor will it for members of a community facing school consolidation or teacher shortages, or for an individual who loses a loved one because the ambulance could not arrive in time to save them. Further, households whose homeowners insurance have increased exponentially as fire and emergency response times lagged will likely pay out considerably more in new insurance costs than the $1/week they gain.

While “tax cuts” in a vacuum might poll well, Justice and state legislators have a responsibility to the West Virginians they serve to be honest about their bloody costs — which are always passed on to households to bear when public services decline.