Improving West Virginia’s Competitiveness: How the Mountain State Matches Up With Our Region Where It Matters Most

Introduction

Nearly everyone agrees that policymakers and citizens should do all we can to make West Virginia a place where families and businesses can thrive. Vibrant communities, safe neighborhoods, high-quality education, strong infrastructure, and healthy residents are shared goals for most West Virginians.

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Recently the conversation about improving West Virginia has centered almost exclusively on cutting taxes as a means of attracting people and businesses to our state. In fact, we’ve seen personal income tax cuts enacted three times in the last 18 months, with West Virginia enacting the deepest tax cuts of any state since 2021; this resulted in a larger cumulative impact on state general revenue than the infamous Kansas tax cuts that were quickly rolled back due to public pressure in the mid-2010s.[1]

Now some are arguing for deeper tax cuts—even going so far as to call for the elimination of the state’s progressive personal income tax, which still makes up nearly 40 percent of the state’s general revenue budget and funds public schools, health care, senior centers, and the day-to-day operations of the state government and agencies.

Centering the conversation about West Virginia’s regional competitiveness on tax cuts only looks at one side of the equation. What are the costs to society, families, businesses, and our economy when we have fewer public dollars to invest in services and programs? Safe neighborhoods, high-quality education, infrastructure, and public health are all supported by public investments to fund collectively the things none of us could afford to fund alone.

West Virginia’s well-being indicators and public investments, the services and amenities offered to families and businesses, are just as integral to understanding what draws people to a place. After all, taxes are simply the way we pay for our shared priorities and programs that support our people and power our economy. We also have a baseline responsibility to care for those who don’t have the resources to care for themselves—children, people with disabilities, and seniors, among others. Tax revenue allows us to do all of these things. While it is perfectly fair to debate the right levels of taxation and what type of taxes should be collected (including who should contribute and how much), that conversation simply cannot be had without first determining the level of public investments and services people need and want and, by extension, the baseline tax revenue necessary to provide that.

Key Findings

• West Virginia is tied for the best overall tax climate among our neighboring states according to the conservative Tax Foundation and has the lowest overall effective tax rate for middle-income households among the states we border.
• The state’s tax system is still regressive overall, with the top 1 percent of households paying less in taxes as a share of income than the bottom 80 percent.
• West Virginia had the largest reduction in general revenue fund expenditures of any state in the country between FY 2023 and FY 2024 and is on track to decline again in FY 2025, deeply eroding the state’s capacity to provide vital public services.
• FY 2024 marked just the second time in 25 years that West Virginia’s nominal state revenue collections declined outside of a recession, largely due to 2023’s steep income tax cuts and the subsidence of temporary revenue factors.
• West Virginia spends less than our neighbors per capita on public education, child care assistance, and Medicaid.
• West Virginia has the worst child welfare outcomes in the nation, and a wide body of research shows that child welfare outcomes are correlated with generosity of state spending on safety net programs.
• School bus drivers and educators in West Virginia make far less on average than they could in any neighboring state, driving worker shortages in school districts.
• Tax-flight migration claims are overstated, with the majority of interstate movers reporting they moved because of work or family. Nearly as many people moved from Florida to West Virginia in 2023 as moved from West Virginia to Florida.
• Overzealous tax cuts can have the opposite of the intended effect, making our state less attractive to families and businesses if they undermine the state’s ability to provide the high-quality public services that people value. 
• Policymakers can raise more than $600 million annually by modernizing the state’s income tax brackets and raising corporate and industry tax revenue to strengthen funding for critical public services without raising taxes on the vast majority of West Virginia households, making our tax system fairer for working West Virginians in the process.