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West Virginia spots population growth hopes on tax cut

CHARLESTON, W.Va. (AP) – With West Virginia on the verge of losing another seat in Congress due to steadily declining population, Republican lawmakers are convinced that a massive tax cut on income is the key to turning the tide. But figuring out how to do this without harming the state’s most vulnerable or driving a massive hole in the budget has proven complicated.

Although the United States has doubled its population over the past seven decades, West Virginia has taken the opposite 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. Figures from the 2020 US Census, which is expected to be released later this month , are expected to reduce the seats in West Virginia. in the United States House from three to two.

But Republicans in West Virginia say a pandemic that has devastated some state budgets has highlighted the positive side of their state. They say its mountain views, wide open landscape, and low cost of living have given the state a unique chance to attract new residents under the lure of lower taxes.

“The whole world is watching us right now,” Republican Gov. Jim Justice said this week. “There is a giant emergency.”

Despite the one-party regime in the state, justice has struggled to convince his fellow Republicans what a big tax cut should look like. Many say that a state that has long faced economic hardship should be careful about raising its sales tax or taking other measures that could harm its most vulnerable populations.

With the session due to end on Saturday, time is running out to do something this year.

Critics say leaders are embarking on an experiment of population growth that will likely result in cuts to education and social services in one of the country’s poorest states. The latest plan approved by the Senate after weeks of wrangling would cut income tax by 40% and raise sales tax from 6% to 8%, which would be the highest in the country. The courts initially called for a 60% reduction in income tax.

It also includes a host of tax increases for energy companies and the service sector. A controversial tax on groceries was removed from the Senate bill after the governor called it a “showstopper.”

West Virginia’s population has shrunk 11% since 1950, when it peaked at just over 2 million and its economy was buzzing with coal mines.

In an interview, the court said the state was on the verge of receiving an income tax cut due to the state’s proximity to the east coast and population centers. “And if you don’t think that will lead the people to the state of West Virginia, you’ve completely lost your mind.

Experts say there is no consensus on whether low taxes are the engine of population growth. “There is no credible evidence to show it,” said Kim Rueben, director of the Public and Local Finance Initiative at the liberal-leaning tax policy center Urban-Brookings. She said taxes can be a motivator for businesses and residents, but it’s not the only one.

“We’re putting a lot of our eggs in this basket, that it will increase our population, that this growth will help pay for” the cuts, said Sean O’Leary, senior policy analyst at the West Virginia Center on Budget & Policy. , who criticized the proposal.

Jared Walczak of the Washington-based Tax Foundation, a right-wing think tank, cites nine states that have no income tax as saying “there is a real appeal.”

But he added that “there is also no silver bullet when it comes to taxation. The goal is to grow the economy. And he cautioned against overly optimistic estimates: “Sometimes it’s easy to get carried away by the effects.”

On Good Friday, about two dozen people outside the State Capitol in Charleston held signs and spoke out against the legislature’s proposals, which result in cuts to higher education.

“It is immoral, inhuman and wrong to line our pockets with the guts of the poor,” said Reverend Ron English, president of the Charleston NAACP.

Income tax attracts around 40% of state revenue, leaving the GOP supermajority in state house mired in disagreements over how to balance future budgets. More conservative members want deep spending cuts and oppose any increase in taxes on energy companies.

A businessman invested in coal, Justice said companies could afford to “throw in a few more pennies,” while critics in his party said the declining industry had suffered enough.

Inside the Capitol, Senate Republicans narrowly passed a bill 18-16 Wednesday night that closely matches a compromise proposal released by justice. The House of Delegates has yet to discuss the changes.

The last measure includes the tax refund proposed by the governor for employees of $ 35,000 or less. A former Democrat, Justice has backed down on cutting taxes if it means putting “an incredible burden on those who struggle the most.”

But a luxury tax on any item costing at least $ 5,000, championed by the governor, was not incorporated into the Senate version. Republican Senate Speaker Craig Blair initially indicated he was open to the idea at a compromise meeting on Monday.

Blair represents Berkeley County, a bright spot of growth in the eastern part of the state. Its largest city, Martinsburg, is about an hour and a half from Washington, DC, and the county is bordered by both Virginia and Maryland.

Blair and other Republicans in West Virginia have a vision to get new residents – and their spending habits – to move further west. And their hope, if they can figure out the details, is that the prospect of paying little or no income tax will be what draws them there.

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