Monday, August 15, 2005

Can WV Afford Some Modest Tax Cuts? You Bet

If you are one of the millions of Americans who suffer from insomnia, may I commend for your nocturnal reading pleasure the Comprehensive Annual Financial Reports of the State of West Virginia? These reports are punished annually by the Department of Administration's Division of Finance and include data from the most recent ten fiscal years summarizing various state revenue sources and spending categories.

According to the 2003 CAFR--the most recent edition published online (direct link to stats used in this paragraph, Adobe Reader required)--total revenues from the sales tax grew from just under $690 million in FY 1993 to over $917 million in FY 2003. Over the same period, personal income tax revenues grew more rapidly, from just over $666 million to just over $1 billion. Both of these taxes saw no rate changes or other major changes in their structure. Total state revenues from all taxes combined have grown over the same period from $2.2 billion to $2.9 billion. Over the same period, the state's population fell by 1% and public school enrollment fell by 11% (even though overall education spending increased by over a billion dollars.

Why do all these figures matter? If you believe the Ruling Party's legislative leadership, if not for the pension debts we need to pay, we still have many unmet spending needs. Of course, they have jettisoned the latter line from their talking points since they now know how volcanic the response would be at election time if they just said, "Sorry, we're not going to give you any tax breaks because we need to spend that money a lot more than you need it." It is quite ironic that one of the largest areas of increased spending, education, received a cumulative increase in its annual appropriation of over $1 billion--representing a 77% increase, from just over $1.3 billion to over $2.3 billion--even though public school enrollment fell by 11% over the same period--combining for a per student increase of over 85%. Even though we are the poorest state in the country, we rank 12th in total education spending per pupil in daily attendance, at just under $10,000 annually. Adjusted for per capita income, West Virginia is second only to Connecticut in education spending. The product we are receiving is scandalous, but I will comment more on that later.

These figures are also relevant because most tax cut plans that have been proposed by the Republicans over the years have involved phased-in cuts over varying periods of years that would allow the present levels of government services to continue by using each year's revenue increases for cutting taxes instead of increasing spending. Don Blankenship is advocating an immediate, full repeal of the food tax since it was reinstated in one installment. However, the whole purpose of the phased-in nature of the various tax cuts legislative Republicans have offered is to try to show some good faith with the Ruling Party and also demonstrate how unreasonable the Ruling Party has been in their blanket rejection of these proposals.