Kiss Joins Helmick in Publicly Opposing Tax Relief, Employs Dishonest Rhetoric About the Need to Pay Debts First

Just after I complained last night of the incredibly slow pace of news, I read in today's Beckley Register-Herald that House of Delegates Speaker Bob Kiss has joined Senate Finance Committee Chairman Walt Helmick in parroting the Ruling Party's legislative leadership party line against proposals to reduce West Virginians' tax burden (article no longer available online).

For the uninitiated, Kiss is one of those "conservative Democrats" that would like you to think he's a Republican in everything but name and usually comes down on the conservative side of issues when they finally make it to a vote. As any longtime observer of the Legislature knows, although liberal legislation rarely passes, the progress of conservative legislation is severely impeded via the committee process and the placement of liberals in key committee chairmanships (i.e., Delegate Jon Amores at House Judiciary or former Senator Bill Wooton during the decade he chaired Senate Judiciary). When he votes, Kiss has usually been such a reliable conservative vote that former Governor Cecil Underwood attempted to appoint Kiss to the state Supreme Court in 1999. Of course, what other kind of Democrat would manage to stay in office in a county where President Bush won 62% of the vote last year?

Like Walt Helmick, who I discussed Tuesday and Wednesday, Kiss has decided to play a sleight of hand by opposing tax cuts and claiming that we really need to appropriate more money toward reducing the state's debts while also planning to increase spending. They say we don't have the money when tax cuts are proposed but say we do when increasing spending is proposed. The decisive votes that defeated the pension bond in June came from people like me who used their vote to deny the legislature more money to spend; if the bond has passed, the "savings" that would have resulted would have all been redirected to other spending.

The legislative Democratic leadership needs to tell us the truth. Either we have enough money for either more spending or tax cuts or we don't, but there's no way we can have it for the former but not the latter. They really need to revise their talking points to take a consistent line on whether we're really rolling in the money. I suspect that we do have enough money and the people of West Virginia need to debate the question of how to proceed with this money. Sadly, I suspect that the Ruling Party's legislative leadership is playing these games with us because they know they would lose if we West Virginians had the debate over whether we should dispose of the extra anticipated state revenues by increasing spending or cutting taxes. They would not only lose--I suspect they would be blown out of the water and possibly out of power for the first time in over 75 years.

What about the debt payment option? I wouldn't mind using the extra state revenues for debt reduction if the leadership of the Ruling Party would be honest with us and we had stronger controls on state taxes and spending in the state Constitution and if the poorest state in the country wasn't one of the most heavily taxed per dollar of per capita income.

Here are some statistics on how West Virginia compares to other states in state taxes, as of 2004, most of which are courtesy of the Tax Foundation:

• We are one of few states in the country that subjects groceries to the sales tax. Of our 5 neighboring states, only one--Virginia--taxes groceries, and does so at a reduced rate.
• Only nine states have a state sales tax rate higher than our 6%. Many of these states--Nevada, Texas, Tennessee, and Washington state--do not have a personal income tax.
• We are one of few states in the country that subjects residents in poverty to the state income tax--almost every other state with a personal income tax has a personal exemption large enough to exempt people below the federal poverty line from taxation.
• We have a higher top marginal personal income tax rate than 4/5 of our neighboring states--ours is 6.5% compared to 3.07% in PA, 4.75% in MD, 5.75% in VA, 6% in KY, and 7.5% in OH (which is scheduled to be reduced significantly over the next few years).
• We have one of the highest corporate income tax rates in the country at a flat rate of 9%. The only states with a higher rate are Alaska at 9,4% (a state with no personal income tax or sales tax), Iowa at 12%, Massachusetts at 9.5%, Minnesota at 9.8%, New Hampshire at 9.5% (a state with no personal income tax or sales tax), Taxsylvania--er, Pennsylvania--at 9.99%, Vermont at 9.75%, and the People's Republic of Washington, DC, at 9.98%.
• We have an extremely onerous business franchise tax that taxes all businesses, large and small, corporations and otherwise, based on their capital. This tax is a significant impediment to business investment in this state. In fact, since 2001, this tax has raised more revenue than the corporate income tax.
• Although this falls on the spending side, we have a larger state government per capita than 47 other states and all 10 Canadian provinces.

Thanks to state revenues for FY 2005 exceeding estimates by over $400 million, the Legislature eliminated the entire unfunded liability in one of the State Police pension funds. To the extent we can more quickly eliminate the other pension debts, we should. However, the Ruling Party leadership's rhetoric about opposing tax cuts because they want to focus on debt reduction is a pure fraud. Because of our excessive tax burden, the cause of tax relief is even more compelling than additional debt reduction when we're meeting the payments on the existing debt payoff plan and reducing taxes might actually spur additional economic activity that would result in additional tax revenues. Then, if we have surpluses, we should appropriate funds toward additional debt reduction. Creating new spending programs that will need recurring appropriations every year is not the responsible thing to do.

When a member of the Ruling Party's legislative leadership is asked about tax cuts, their recital of the talking points will include the story of the massive tax hikes passed in 1989 (including the food tax and raising the sales tax from 5% to 6%) and how they were caused by irresponsible tax cutting in the past. Nowhere do they mention spending. And if there's concern about the people who actually have to pay these taxes, it sure isn't apparent. The Ruling Party likes to remind us they have since reduced the business franchise tax, exempted families making less than $10,000 a year (about half the federal poverty line for a family of four) from the personal income tax, and repealed the physician provider tax (a 5% gross receipts tax on doctors). The truth is that they passed each of these relatively small tax cuts while kicking and screaming after the deluge of support for these Republican-originated bills.

As I have written before, one of the solutions for our state's seemingly endless cycle of more spending, fiscal crisis, and tax increases, is to adopt a tax and expenditure limit similar to Colorado's Taxpayer Bill of Rights. In the absence of a strong legal restraint on spending, government will naturally grow faster than the desire of the taxpayers to support it. Of course, doing this will require getting the 2/3 vote in both houses of the Legislature necessary to propose a constitutional amendment, which is very unlikely at this point. During the past regular session, a bipartisan group of members of the House of Delegates introduced HJR 20, which would copy Colorado's successful TABOR limit. The Democrats cosponsoring this amendment were Tom Louisos of Fayette County and Jeff Eldridge of Lincoln County (at least on this issue, here's hoping he didn't win election to his office "the old-fashioned way" and thereby put himself in jeopardy of following his term in the House with a term in a federal prison cell). I am working on my own proposal that is similar to this amendment.

PA State Police Ticket Quota Saga Continues

For about the last 3 years, a scandal has been slowly unfolding in the ranks of the Pennsylvania State Police over the use of illegal ticket quotas and the increasingly high likelihood that a large number of tickets have been wrongfully issued by officers seeking to meet their quotas.

An investigation by the Pittsburgh Post-Gazette found that state troopers were either rewarded or punished based on whether they met "station averages" for tickets through the assignment of very lucrative overtime duty and other work scheduling practices. In addition, the radar guns used by troopers have been found to be severely flawed and unreliable.

The best advice I can give for driving in the Keystone (cops) State is to get some good equipment and know where to look for the lurking blue light special.

Emu Killed During WVU Chase

It's been a slow news week as far as the topics I care to address here. Today's Morgantown Dominion-Post had this story leading the front page: Emu Killed During WVU Chase

So, Why is Cutting WV Taxes OK Despite the Multibillion Dollar Unfunded Liability?

If you believe the somewhat less than luminary minds that occupy the Democratic leadership in the Legislature, West Virginia should not cut taxes until we've paid off the ~$5.5 billion (present value) unfunded liabilities of the state pension funds. This is the same cabal, mind you, that is simultaneously preparing to pass public employee pay raises and maybe other spending programs that will require higher state spending permanently.

As a basic economic matter, the state has its debts under control and has kept to a 40-year plan adopted in 1994 that established a structured amortization of the billions of dollars by which promised pensions for state employees and public school teachers were underfunded. This plan provides for gradually increasing payments each year. Currently, the annual payment is just over $350 million; it will eventually rise to over $700 million by the end of the program. This was done in recognition of the fact that there will be gradual inflation and growth in state revenues. The current plan assumes an annual growth of about 3 percent in the required payment, which is approximately the current rate of inflation nationally. At this rate, a dollar today would be two dollars in 2034. For comparison, state revenues have tripled over the last 30 years. The thought of state revenues and spending tripling again over the next 30 years unsettles me a bit and probably does the same to you, but foregoing tax cuts only makes that part of our history more likely to repeat itself. While I obviously prefer that if the state must spend more money, the money should be spent on the pension debts and nonrecurring projects, foregoing tax cuts for the sake of accelerating the pension debt payoff just isn't necessary.

Now, for the political aspect of this dispute. As I said yesterday, the Democratic leadership says Yes to more spending and a decisive No to giving even a pittance of relief to those of us who pay the taxes that support our state government. If we send it, they'll spend it.

One of the areas in which the Democratic legislative leadership is considering new spending is public employee compensation. As I said yesterday, I don't object to this per se if it's done in a way that does not generate a new unfunded pension liability and conforms to realistic estimates of the state's future financial condition and ability to pay without raising taxes or taking other fiscally irresponsible moves. However, I expect that the people who pontificate about the need to pay off our debts before we cut taxes will be the same people who will grab their shovels and dig our hole a bit deeper. In fact, they already did so earlier this year when they enacted a bill to revert to a defined benefit pension system for public school teachers from the defined contribution plan that had been in operation since 1991. We cannot trust them, and for good reason. Here's a sample:

• Senate President Earl Ray Tomblin's family annually receives hundreds of thousands of dollars from the state Greyhound Breeders Development Fund for breeding greyhounds for Tri-State Racetrack & Gaming Center and has been the largest recipient of money from this fund for years.
• Tomblin's wife Joanne (who does not hold a doctoral degree) makes over $90,000 per year as the President of Southern West Virginia Community & Technical College, although even that is chump change compared to the fortune they made when they sold their video poker business to Delegate Joe C. Ferrell, who himself has quite a checkered past.
• Senate Majority Leader Truman Chafin has tried repeatedly to create a second Circuit Court judgeship in Mingo County to dilute the influence of the county's judge, a Chafin adversary, even though the county has no need for two judges and the state Supreme Court has the power to temporarily reassign other judges if the local judge is on vacation, must recuse himself from cases, or a case backlog develops (which has not happened but would make a case for a second judge should it ever happen).
• Disgraced former House Education Committee Chairman Jerry Mezzatesta illegally steered hundreds of thousands of dollars of education funds away from more deserving counties to his employer, Hampshire County schools, while collecting paychecks for both jobs simultaneously and despite an agreement with the Ethics Commission stipulating that he would not use his leadership position to steer money to his employer. Mezzatesta was formerly a $60,000 a year grant writer whose job description involved applying for federal and private grants; he wrote no grant applications in his five years in that position although he steered a lot of state funds.
• Attorney General Darrell McGraw spent hundreds of thousands of taxpayer dollars for "public service announcements" last fall that not so coincidentally heavily promoted the family name while he & his brother Warren were locked in tough reelection battles and did not stay on the air after Election Day; Darrell won an 8,000 vote squeaker but we defeated Brother Warren in the Supreme Court contest.
• Now since this posting isn't intended to be a Who's Who Among Self-Serving Back Room Power Brokers in West Virginia Politics, I will stop with that.

While most of the talk lately has centered on whether groceries should remain subject to the sales tax (the vast majority of states don't subject groceries to their sales taxes), it's got a lot of company among the taxes the Democratic legislative leadership flatly refuses to consider cutting. While I personally think there are other ways the state could cut taxes to have a more significant positive impact on the economy and/or reduce other inequities in our tax structure, most people view the effort to end the food tax as a moral issue and I tend to agree with that point. In recent years, Republican legislators have offered proposals for tax cuts in each of the following areas, all of which go to the Finance Committees to never see the light of day:

1. Food tax
2. Business Franchise Tax
3. Corporate Income Tax (we're near the top at a flat 9%)
4. Personal income tax personal exemption (we're one of few states where families below the poverty line have to pay state income taxes)
5. Personal Income Tax marginal rates (our top rate of 6.5% is higher than every neighboring state but Ohio, whose recent tax cut legislation will change this)
6. Personal Property Tax
7. Motor Vehicle Privilege Tax (which taxes your vehicle at 5% every time it gets a new title unlike the sales tax, which only taxes items once when they're first sold)

The Republicans in the Legislature have bent over backwards to craft tax relief plans that would "be paid for" through future revenue growth by phasing in the proposed cuts. They've offered food tax repeal bills containing phase-out periods as long as 12 years and at other times offered bills that would automatically delay additional installments of proposed tax cuts if state revenues didn't grow by a specified minimum amount from year to year. I don't like the revenue trigger idea myself, but it was proposed in some versions of tax relief legislation to demonstrate the abundance of good faith the Republicans were showing toward the Democrats (whose days in the majority are now numbered with only 16 more months left in their control of the state Senate). The Democratic leadership's answer to the question of when will they support a meaningful tax cut is, "When Hell freezes over."

There's a trend here. The Democratic legislative leadership might vote pro-life and pro-gun owner, but they're not all-around conservatives. When it comes to taxes, there's no difference between the Democratic legislative leadership and the tax-and-spend liberals like Hillary Clinton, Howard Dean, and "San Fran Nan" Pelosi that run their party at the national level. They've never met a tax they didn't hike. I predict that we will join the 4 of 5 neighboring states (every neighboring state except Maryland) that have a Republican majority in the state Senate after the 2006 election and the House of Delegates will follow suit in 2008.

Helmick Shows "Conservative" Democrats in the Legislature Aren't as Conservative as They'd Like Us to Think

West Virginia Senate Finance Committee Chairman Walt Helmick, who will face a stiff reelection challenge next year in the sprawling 15th Senatorial District that stretches from his home of Pocahontas County to Martinsburg, was on Hoppy's show this morning to talk about the special legislative session scheduled to begin September 7. Not five minutes after he told Hoppy there was no way whatsoever we could ever afford any tax cut of any kind, he said he generally agreed with the assessment of House Finance Committee Chairman Harold Michael that we can easily afford some pay raises for most state employees. If you understand how we can easily pass a pay raise that would be a recurring item in every state budget hence but not provide any relief for the taxpayers of this state, you're a lot smarter than me and need to apply for MENSA membership.

Now, I understand that many people who have chosen a career in the civil service of this state are paid rather poorly. Salaries are not indexed for inflation, which gradually erodes the real value of their compensation. Of course, keep in mind that we are dead last in personal income across the board. Truthfully, I don't mind a public employee pay raise as long as we take great care to prevent any new unfunded pension liabilities from accruing as a result of any raises. We should even consider an automatic Cost Of Living Adjustment system like the federal government and many other states have to maintain the value of public employee compensation and moderate the annual increases. However, my position ultimately rests on our ability to do so without creating any new unfunded liabilities. We don't need to dig our hole any deeper.

But back to tax cuts. How can the legislative leaders say pay raises are on the docket but any and every proposal conceivable for even modest tax relief seems to bear the Mark of the Beast? Republicans in the Legislature have proposed many plans for phasing out both the food tax and business franchise tax that would permit current levels of government revenues to continue by using future growth in revenues for tax cuts. Senator Vic Sprouse and the other Senate Republicans have proposed phasing out the food tax over as long as 12 years (at just over $10 million per year) and the business franchise tax over a similarly long period.

The ugly little secret of the supposedly "conservative" Democrats in the Legislature is that when it comes to fiscal issues, they're chronic taxaholics in denial--and not just any case, but John Kerry/Ted Kennedy/Michael Dukakis-type taxaholic. To them, tax cuts can never happen, because "we don't have the money." The legislative leaders think we work for them and then we serfs get to keep what they let us after they take what they want. It's time to make a run on the pitchforks.

Helmick's rhetoric about opposing tax cuts because he wants to pay the state's debts and unfunded liabilities is as empty as the bar at Teddy Kennedy's house on Sunday morning. Only if we had a constitutional spending limit like Colorado's Taxpayer Bill of Rights, which has refunded over $3 billion to Colorado taxpayers over the last 12 years and promoted robust economic growth, could we treat such rhetoric with any seriousness. I am drafting a state constitutional amendment limiting taxes and spending in his state that is similar to the Colorado law and will be privately presenting it to several Republican legislators I know. By restraining the growth of government in the future, we can grow our way out of high taxes and economic stagnation. Instead of a vicious cycle of economic stagnation and tax hikes, we can embark on a cycle of economic growth and tax cuts thanks to the revenue growth that will result.

BTW, if you're reading just this story and not the whole blog, you'll definitely want to read my follow-up, So, Why is Cutting WV Taxes OK Despite the Multibillion Dollar Unfunded Liability? or the whole blog itself.

Forced Transfer of WV Teachers Defined Contribution Plan Members to Defined Benefit Plan Unwise, Probably Unconstitutional

During this year's regular legislative session, state lawmakers passed HB 2984, which calls for an election next year of the 22,000 members of the Teachers Defined Contribution plan on the question of whether to convert the plan into the old Teachers Retirement System, which the Legislature closed to new participants in 1991 after the system accrued a multibillion-dollar unfunded liability. The Legislature's action earlier this year was an extremely unwise and probably unconstitutional move.

The Legislature made a rare, intelligent decision in 1991 when it required all newly hired public school teachers to participate in a defined contribution retirement system rather than the defined benefit plan that was available to previously-hired teachers and which was grossly underfunded. Now, however, the Legislature has proposed not just reopening the old system, but forcing almost 22,000 public school teachers in this state to transfer to the old system.

Reopening the old Teacher Retirement System is dumb and forcing members of the defined contribution system to convert to the defined benefit system is probably unconstitutional. If anything, the Legislature should be requiring that every newly-hired state and local employee, with the exception of police officers, firefighters, and other employees in extremely hazardous jobs, be eligible only for a defined contribution retirement plan rather than a defined benefit plan. Forcing defined contribution plan members to switch to the defined benefit plan would involve the confiscation of their individual assets (the individual accounts under the defined contribution plan) and the conversion thereof to a collective asset. This is plainly unconstitutional and I expect that unless the Legislature reverses this move, defined contribution plan members who don't want to switch will clean the state's clock in court.

One of the reasons West Virginia voters rejected the Pension Bond Amendment on June 25 was the lack of sufficient safeguards to prevent future governors and Legislatures from digging another hole if we bonded the state's existing unfunded liabilities. As someone who had mixed feelings on the issue and ultimately voted against it because of problems with that specific plan and not the concept, I do not hesitate to say that a pension bond would pass if the Legislature would incorporate more safeguards into the proposal, including an ironclad requirement that newly-hired public employees at all levels with the exceptions mentioned above not be eligible for any defined benefit pension system and that existing defined benefit plan members have the option of converting to a defined contribution plan. Another pension bond proposal might also fare better at the polls if our state's leaders have plans for the savings to the state budget resulting from bonding the debt other than spending it. We taxpayers wouldn't mind being thrown a couple of bones in the form of tax cuts.

Dems Want to Play "Let's Make a Deal" on Gambling, WVGOP Wants Your Response

This morning, I got an e-mail from the state Republican Party. Fundraising, I thought. No; this time they wanted not money but just my thoughts and those of other Republican activists. The Democrats want to play Let's Make a Deal with our caucus on table games so they can pass the bill and have political cover in next year's elections. The e-mail I received and my response follow. If you agree with me, I hope you'll share your thoughts by e-mailing the state Republican Party at wvgop@wvgop.org and also contact your Republican state legislators if you're fortunate enough to already have proper representation in Charleston.

The party's e-mail follows:

REPUBLICAN STATE EXECUTIVE COMMITTEE
http://www.wvgop.org/

TO: West Virginia Republican Voters
FROM: West Virginia Republican Party
DATE: August 7, 2005
RE: Gambling Proposal -- We Need Your Input!

Recently, news reports have indicated that Governor Manchin is floating a "gambling restructuring" proposal that would:

• Reduce the number of video slot machines available, by law, from 8,000 to 7,000; and
• Allow a vote to legalize table games at the State's racetracks.

Supporters say that it is extremely important to stop the growth of the "mini-casinos" that are inundating our communities. They claim that this bill will reduce the number of neighborhood slot machines.

Opponents to the Manchin proposal argue that:

• There are only 7,000 neighborhood slot machines currently outstanding. A proposal to "reduce" the number of machines available to 7,000 would result in no reduction at all.
• The proposal is merely a ploy to expand gambling by legalizing table games.
• The Legislature can still enact a bill to stop the growth of the "mini-casinos" - without allowing table games.

We want to know your position on this issue.

Governor Manchin has set a special session of the Legislature for September 7th. Please take a few moments to respond by e-mailing Republican Party Headquarters directly at wvgop@wvgop.org

There's not much time! We need to hear from you as soon as possible!

My response:

The whole proposal of tying a reduction in video poker to table games is a clear sign that the Dems are desperate and are seeking our votes to get table games, and for good reason. During the regular session, a table games bill passed the Senate 19-14 with 5 Republicans--including 3 who have no tracks in their districts--voting for it. The votes aren't there to pass the bill unless at least 3 Republicans vote for it.

The movement by Governor Manchin to propose tying table games to video poker reform has the potential to plunge the Dems into the civil war many of us have been expecting since he disappointed his base by making most of his agenda watered-down versions of what we have been proposing on Worker's Compensation, tort reform, and insurance law reform. You can bet that Senate President Tomblin and Delegate Joe C. Ferrell, a video poker operator who bought the business from Senator Tomblin, will work to impede anything that would further restrict video poker. They will look after their own.

The Dems either lack the votes outright to pass a table games bill or they have so many members on their side of the aisle scared as white as a ghost about what might happen in the elections next year if they pass the bill by a razor-thin margin like the video poker will with near-unanimous Republican opposition. Six Democratic senators--Helmick, Jenkins, Oliverio, Plymale, Prezioso, and Unger--voted against the table games bill (Bowman was excused because he works for Mountaineer Park) and all of them except Helmick appear to be reliable votes against any new incarnation of table games legislation. Being forced to cast a deciding vote would force Helmick to decide between his leadership and his political career or force the leadership to risk a new ethics scandal by letting Bowman vote on the bill this time. All this is presuming that the votes are needed in the Senate. If I'm wrong and the Dems are short on votes in the House (where they control 68 seats if everyone shows up), they're in serious trouble and we should not hand them a life preserver here but maybe a few anchors instead.

The other major point to consider is that any "reduction" in video poker as a result of any deal will not be a true reduction in the number of mini-casinos that have overrun this state like kudzu in the last few years. Any such "reduction" would merely be in the form of not allowing the final 1,000 machines to go online. The state issued long-term licenses to poker operators and cannot simply cancel them on a whim. If we're going to reduce video poker, which we should, we need to work on gaining control of the Legislature and getting the votes to simply repeal the video poker law when the licenses expire.

Opposition to gambling is a huge issue to our base. West Virginia is a fundamentally conservative state, especially on social issues like abortion, guns, and gambling. Polling shows that upwards of 70% of West Virginians identify their politics as "conservative" to some degree. There is nothing to gain and everything to lose if we make a deal with the devil here. Now is not the time for compromise. We hold in our hands the sword to inflict a mortal blow to the expansion of gambling in this state and hasten our ascendancy to the majority. Any concession on this issue puts at risk the enthusiasm of our supporters and the chances our candidates for the Legislature and maybe even Shelley Moore Capito will have in the elections next year if our folks are angered and stay home. As we saw last week in Ohio, we cannot afford a deenergized Republican base. Any Republican who tries to cut a deal on this issue knowing this does so at the peril of his political career and of our party's chances at winning control of the Legislature and giving Shelley Moore Capito a promotion to Senator if she so desires.

I hope you'll agree with me and join in holding the legislative Republicans' feet to the fire. You may e-mail the state Republican Party at wvgop@wvgop.org and also contact your Republican state legislators at the respective links.