Blog Posts > Kunkel, Boettner: Money Doesn’t Fall Up in West Virginia
April 7, 2019

Kunkel, Boettner: Money Doesn’t Fall Up in West Virginia

Charleston Gazette-Mail – Reflecting on the legislative session that ended last month, one topic was never directly addressed even though it underlies many of the issues that became key topics of the session, from foster care to raises for school employees: West Virginia’s growing economic inequality. Link to article.

In West Virginia, the top 1 percent of the population had an average income of $536,000 in 2015, more than 10 times higher than the state’s median household income of $43,500. In other words, 13.4 percent of all of the income earned in the state goes to the richest 1 percent. And this fraction has been growing since the 1980s, as it has been for the country as a whole.

As more and more of us have been left behind and left out of economic growth, we’ve seen growing social and political problems. It is impossible — as we witness daily — to have a functional political system that responds to the needs of the majority of Americans when wealth and power are so concentrated in the hands of a few.

This widening inequality is not an inevitable feature of our economy. However, it is a direct result of policy choices. In West Virginia, over the last decade or more, our state Legislature has slowly shifted tax responsibilities away from corporations and increasingly onto individuals, particularly lower-income individuals.

Starting in 2007, the Legislature began to reduce the corporate net income tax and phase out the business franchise tax. To (partially) compensate, local governments have raised sales and excise taxes and the state government has raised taxes on tobacco, gas and online sales while increasing DMV fees. Such taxes tend to be regressive, meaning that they hit lower-income people harder.

In West Virginia, according to the Institute for Taxation and Economic Policy, families with incomes below $30,000 pay over 9 percent of their income in state and local taxes while the top 1 percent — with an average income of over $700,000 — pay just 7.4 percent.

Lawmakers last month also reduced the severance tax rate from 5 percent to 3 percent for steam coal, which will cost the state $64 million annually once fully phased in, and they passed a new “super tax credit” for coal companies. An analyst with Seaport Global Securities estimates that just one mine operated by Arch Coal in Barbour County would receive a $100 million tax reduction. Both of these tax cuts will do little to nothing to bring back mining jobs but will likely lead to tax hikes on the working class or cuts to schools, colleges or health care.

To add to this, the federal government, in late 2017, passed a major tax bill that disproportionately benefited higher-income Americans. In West Virginia, only 13 percent of the tax cuts went to those making under $51,000, while the top 1 percent received 22 percent of the tax cuts.

Since the 1970s, economic productivity has increased but the gains have increasingly gone to the wealthy in the U.S. and West Virginia. From the 1940s until the 1970s, productivity and worker pay increased in tandem in the U.S. But productivity has increased by more than 50 percent since 1979 in West Virginia while median hourly compensation grew by just 3.6 percent. This means that, although West Virginians are more productive than ever, the fruits of their labor have primarily gone to those at the top and to corporate profits.

Here, too, the West Virginia Legislature has headed in the wrong direction, actively pursuing policies that weaken the working class, with the goal of holding wages down. In recent years, these policies include repealing our prevailing wage law, enacting sub-minimum wages, passing a right-to-work bill that makes it harder for workers to unionize and attempting to pass legislation that would weaken school employees’ unions.

What steps can we take to reverse this trend? A start would be to reverse some of the policies of the last couple of decades that have shifted tax responsibilities towards those least able to pay — such as closing corporate tax loopholes, bringing back our estate tax, raising the natural gas severance tax and taxing out-of-state landowners — and to support economic policies — like debt-free higher education, paid family and medical leave, and health care for all — that work for all of us.

For those interested in learning more, the question of how we can respond to runaway inequality will be the subject of a public workshop by longtime labor organizer Les Leopold on Sunday, May 19, from 2-4 p.m. at Temple Israel, in Charleston.

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