WVU Law Professor Says GOP Has Right to Seek Full Elimination of the Food Tax

Among the many stories in today's Charleston Gazette pertaining to the special legislative session, one really caught my attention. WVU law professor Bob Bastress, whose politics tilt more than slightly to the left, says the Legislature would be within its authority to amend Governor Manchin's proposed 1% food tax reduction to provide for a full elimination of the food tax. Manchin's proclamation convening the special session had limited the food tax bill to a 1% cut.

In a 1932 case, the state Supreme Court ruled the Legislature had the flexibility to address the issues presented in the governor's call more broadly. In part, the court said:

“In authorizing a Governor to state the business of an extraordinary session, and in limiting legislative action to that specific business, the Constitution does not confer on him one jot of legislative power.

“The Constitution vests that power exclusively in the Senate and House of Delegates, whether the session be regular or extraordinary.

“When, therefore, the governor, by his proclamation, couched in such language as he may select, has fairly indicated to the legislators and the people, a general subject for legislative consideration, the legislature, in special session, may lawfully deal with that subject as fully and completely as at a regular session.”

Republican legislators believe they have the necessary votes in both houses to amend the Governor's bill to completely eliminate the food tax. The Governor can always veto the bill and is threatening to do so. The Gazette reported the veto threat today.

Thanks to the Ruling Party's voracious appetite for our money, the state's total tax revenues have grown from $1.4 billion in FY 1989 to $2.9 billion in FY 2003 (and are now over $3 billion)--increasing by 2 1/2 times the combined rate of inflation and population growth and 30 percent faster than personal income.

Today, the tax cut in question happens to be the food tax. More than a fiscal issue, it's a moral issue. Elimination of the tax is supported by over 80 percent of West Virginians and one in particular who is willing to put a lot of money behind the cause. Some say other tax cuts could produce a greater bang for the buck, and they're right on that count. However, where are they when we're proposing reducing or eliminating the business franchise tax, reducing the corporate income tax, or promoting a comprehensive structural reform of the tax code proposed by a commission that counted among its members the chairmen of both finance committees?

The Ruling Party's leadership reflexively opposes every tax cut of every size, shape, and implementation period. Even when we propose measures that would merely slow the pace of revenue growth and not result in actual net revenue reductions from year to year, they say "No!" Just as in the Capital One ads, the answer's always no. They probably have their own David Spade somewhere undercover constantly testing members of their caucus.

Manchin Threatens to Veto Food Tax Cut Exceeding 1%

Apparently not satisfied with the controversy he created by unconstitutionally limiting the scope of food tax relief legislation in the current special legislative session, Governor Manchin now says that if the Legislature defies his decree and passes a bill that cuts the food tax by more than 1%, he will veto it, today's Beckley Register-Herald reports.

House Bill 401 would reduce the sales tax on most food products for off-premises consumption from 6% to 5% effective January 1, 2006. Republicans in both houses will offer amendments to the bill to completely exempt groceries from the sales tax and believe there are sufficient votes in both houses to prevail. Even Senate Majority Leader H. Truman Chafin, D-Mingo and political opportunist extraordinaire, opposes the governor's restriction on the scope of this bill and has previously supported eliminating the entire food tax.

Most political observers would tell you that the Governor should have known at the time he endorsed even a minimal food tax cut that he was opening the barn doors for outright repeal. Polls consistently show that over 80% of West Virginians support abolishing the food tax--which was phased out between 1979 and 1981 and reinstated in 1989 amid a severe state budget crisis in which the state couldn't even pay the electric and gas bills for the State Capitol.

The state's Comprehensive Annual Financial Reports show that total state tax revenues have climbed from $1.4 billion in FY 1989 to $2.9 billion in FY 2003--an increase of 107%. More impressively, during that same period, sales tax revenues grew from $372 million to $917 million (an increase of 146%) and personal income tax revenues grew from $467 million to over $1 billion (an increase of 114%). From 1989 to 2003, West Virginians' total personal income grew from $23 billion to $42 billion--an increase of just 82%. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index increased by 48% over the same period. During that same period, the state's population went relatively unchanged.

So what do all these figures mean? The tax burden faced by West Virginians has grown faster than inflation and even faster than personal incomes. If overall state tax revenues had only grown at the same rate as personal income, FY 2003 state tax revenues would have been $2.5 billion rather than $2.9 billion. This would have resulted in a savings to the taxpayers of 400 million--enough to completely eliminate the food tax, the business franchise tax, reduce the sales tax from 6% to 5%, and them some. Had state tax revenues only grown at the rate of inflation and population growth--as required in Colorado under the Taxpayers Bill of Rights unless voter approval is given for additional spending--FY 2003 state tax revenues would have been just $2.1 billion--for a savings to the taxpayers of $800 million, enough to reduce taxes even further and pay down the state's unfunded pension liabilities at a substantially greater rate than has been done so far.

Whenever Republicans in the Legislature have proposed tax cuts--whether it's the food tax, the business franchise tax, corporate taxes, personal income taxes, etc.--members of the Ruling Party are never slow to insist the state needs the money and could not possibly do with less, nor could it afford to even slow the rate of growth of future revenues. Whether the taxpayers can really afford to do with less isn't even an afterthought. The love of money is the root of all evil and the Ruling Party in this state sure loves money--your money and mine, to be precise. After 75 years of one-party rule in the Legislature, what do they have to show for it? The 2006 elections are just 14 months away.

Special Session Call Includes Inappropriate Food Tax Restriction

Although I have yet to obtain an actual copy of Governor Manchin's proclamation convening the special legislative session that begins today, there is some good news and some bad news. The good news is that table games for the state's tracks is not included. The bad news: today's Charleston Gazette reports that Governor Manchin has specified in the call that the food tax reduction may not exceed 1 percent.

As I wrote last week, "Under Article VII, §7 of the state Constitution, when the governor calls a special session of the Legislature, the Legislature 'shall enter upon no business except that stated in the proclamation by which it was called together.' Historically, special session calls have referred to general subject matters for the Legislature to consider."

House Minority Leader (and future Speaker) Charles Trump says that he will propose and expects to pass an amendment to the food tax bill to completely abolish the tax. If the Republican caucuses in the House & Senate receive enough Democratic votes (which is highly likely), a court battle will emerge testing the Governor's power to restrict the Legislature's actions during a special session as narrowly as the current Governor is doing.

Historically, the Governor's constitutional power to designate subjects for consideration at special legislative sessions has been regarded as pertaining to general subject matters. However, it is quite clear that in this case, the Governor is effectively constraining the Legislature to an up or down vote without meaningful amendments that would otherwise be in order on a specific bill. Ordinarily, under our system of three coequal branches of government, the legislative leadership should be outraged at this power grab that clearly infringes on their constitutional prerogatives. However, the Democratic leadership is taking "the end justifies the means" approach to this issue and is permitting this unacceptable infringement upon the legislative branch by the executive. How are they going to feel the next time the Governor calls them into special session and presents to them a complicated issue that could have many possible solutions but uses his power to frame the agenda in a manner that limits them to ratifying or rejecting his proposal? How are they going to react when it's an issue where they cannot afford to reject the legislation but sincerely believe in a different approach--or at the very least letting the subject resolve itself through the normal legislative process and the Governor's use of his veto pen?

Aside from the constitution issues at stake, it should be clear to any intelligent observer by now that the Governor is engaging in nakedly political calculations and protracting the progress of the conservative components of his legislative program. We passed Worker's Compensation privatization this year, but do you know when the law says is the first day a private carrier policy may be effective? July 1, 2008.

The governor says he wants to repeal the food tax, and do it during his term. I believe him. In fact, I believe he wants to do 1% this year, another 1% next year, maybe help the legislative Democrats in the elections next year by highlighting that achievement (although they will have to deal with their votes against full repeal), and then go for the remainder in 2008. While this Governor may very well govern to the right, he is engaging in a deliberate tactic to delay the actual implementation of his major policies until the year he will presumably stand for reelection and attempt to demand the gratitude of the people, to be expressed through their votes in the 2008 general election, for these "fresh" achievements.

In addition to these political benefits, the Governor and Legislature, by implementing conservative policies but doing so at an extremely laggard pace, is preventing the items on our agenda that would follow from taking the forefront. While they continue their additional installments of policies that should be implemented in one fell swoop, we could instead bring to the public forum other needed policies that this state needs to move forward.

Instead of enacting additional installments on repealing the food tax, we could be tackling comprehensive tax reform [SB 188 (Weeks & Yoder) / HB 2445 (Sumner, Sobonya, Wakim, Frich, Schoen & Ellem)] or maybe--Gasp!--more tax cuts. Instead of dillydallying on privatizing Worker's Compensation--which needs only a few months rather than over three years to implement since it's already a competitive private industry in 47 other states--we could instead discuss enacting--and maybe even enact--one of the most monumental changes to our state's business climate than any other 4-page bill that would say more to private industry considering doing business in our state but which would not cost taxpayers one penny: a right to work law [HB 2041 (Overington, Blair, Roberts, Evans & Schadler)].

Trunk Monkey

Normally, I don't post these type of things here, but you definitely have to see the Trunk Monkey. I found the link on Don Surber's blog.