Blog Posts > Business Tax Cuts – No Free Lunch
January 2, 2012

Business Tax Cuts – No Free Lunch

While the state should be doing all that it can to stimulate economic growth and jobs, cutting business taxes is an inefficient, regressive and poor choice for creating broadly shared prosperity. As Sean has pointed out, there are much better ways to accomplish this goal.

As AP points out today, the corporate net income tax rate will fall to 7.75% this year and the business franchise tax will be eliminated by 2015 (see chart below).

In terms of inefficiency, the business tax reductions will likely offer little in terms of creating new jobs or in enticing new businesses to located in the state. Also, there is not guarantee that businesses (mostly large out-of-state businesses pay corporate taxes) will reinvest that money or hire people in West Virginia. Most likely, it will flow out of state to (mostly) wealthy shareholders.

The one thing that is almost certain to happen, however, is a severe drop in state revenue because the cuts were not offset with additional revenue. According to the WV Department of Revenue, the tax cuts will reduce business tax revenues by over $191 million per year by 2017 (see graph below). This means less money for investing in children, public education, health care and other important budget priorities.

Working West Virginians know that if you want something you have to pay for it. There is no free lunch. Giving big tax cuts to businesses while we jeopardize our ability to ensure a better future for the next generation is not a path to prosperity. We need to be investing in the kinds of things that really create jobs, like education, infrastructure, and community development. 

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