The Case Against Austerity: Why Protecting Investments in West Virginia Families and Communities is Key to COVID-19 Recovery

Introduction

With West Virginia still feeling the impacts of the COVID-19 pandemic recession, the state’s leaders face difficult choices in the upcoming legislative session. The choices legislators make will help determine whether or not West Virginia will have a swift and equitable recovery with an economy that works for everyone.

Read the full issue brief.

West Virginia has spent the past decade cutting taxes with little to show for it. Instead of delivering on the promised growth, these cuts have hurt investments in West Virginia, leading to one of the weakest economies heading into the recession. Before the pandemic, West Virginia was consistently losing jobs, and was facing a cumulative $683 million deficit over the next four years. And since the pandemic hit the state in March, tax
revenue is down another $117 million, tens of thousands of jobs have been lost, and the state is years away from a full recovery.

Unfortunately, Governor Justice and legislative leaders have signaled that they desire even more tax cuts, despite the overwhelming evidence and West Virginia’s own experience that tax cuts only lead to painful budget cuts that would result in a longer, slower recovery for the state.

By raising revenue, West Virginia can protect economy-boosting jobs and maintain public investments where they are needed most. Keeping resources flowing to workers, families, schools, and communities will boost the state’s recovery, and keep it moving forward into the future.

Key Findings

• Months into the COVID-19 pandemic recession, West Virginia is down tens of thousands of jobs and tens of millions in tax revenue.
• Even before the pandemic, West Virginia was facing structural revenue challenges and significant budget shortfalls in the years ahead.
• Experience shows that budget cuts will only slow down the state’s recovery, hurting families and making the recession worse.
• Experience also shows that more tax cuts will fail to produce growth, and in fact will lead to budget cuts that will further harm the economy.
• The pandemic recession has disproportionately impacted low-income workers, while high-income earners have nearly fully recovered.
• By abstaining from ineffective tax cuts, and instead raising the revenue necessary to prevent harmful budget cuts, West Virginia can keep money flowing to families and communities, and recover faster, benefiting residents and businesses.