New Report Finds West Virginia’s Tax System Compares Favorably With Our Region, Falls Short on Key Public Services

For Immediate Release: February 6, 2025

Contact: Kelly Allen, (304)-612-4180

Charleston, WV – West Virginia’s new governor, Patrick Morrisey, has called for a “backyard brawl” with our neighboring states to ensure West Virginia has the most competitive possible environment to attract people to our state. Up to this point, that has centered almost exclusively on cutting taxes and deregulation as a means of attracting people and businesses. While often left out of the conversation, West Virginia’s public investments, the services and amenities offered to families and businesses, are just as integral to understanding what draws people to a place. 

Out today, Improving West Virginia’s Competitiveness: How the Mountain State Matches Up With Our Region Where It Matters Most, takes a look at how West Virginia’s tax system and the investments we make with those tax dollars compare with our neighbors. We find that, while West Virginia’s tax system already compares favorably with our neighboring states, it is upside-down, with the bottom 80 percent of households paying more in taxes as a share of income than the top 20 percent. 

Where West Virginia does fall short compared with our region is in per capita spending in the state budget for various essential programs and services, including child care assistance, public education, Medicaid, and other critical programs that serve families and grow our state’s economy. State spending on these programs has fallen behind after years of tax cuts and flat budgets. Tax cuts that undermine the state’s ability to provide high-quality public services can have the opposite of their intended effect, making our state less attractive to families and businesses.

“During the upcoming legislative session, lawmakers have the opportunity to rebalance our tax system and reprioritize funding the critical programs where West Virginia has fallen behind our neighbors,” says Kelly Allen, executive director and co-author of the report. “By raising revenue, West Virginia can simultaneously increase our standing among the states in our region and better serve the families and businesses who already live here. Doing so will improve the lives of the vast majority of households in our state, while the revenue raised will impact very few households and big industries and corporations.” 

To raise new state revenue to fund vital public services, co-authors O’Leary and Allen propose modernizing West Virginia’s personal income tax brackets and enacting a state-level Earned Income Tax Credit, which would on average provide a tax cut to 60 percent of West Virginians and would not raise taxes on any households making under $100,000. These new funds can help strengthen Medicaid and PEIA, increase funding for child care assistance and public school districts, and provide critical revenue for other priorities lawmakers enter the 2025 legislative session with. 

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.  

Read the full report here.