As an outsider who started with nothing, grew a business and raised a family in West Virginia, I and my team had a simple message of basic fundamental principles based on our own experience: If we could fix our legal climate, tax code, education system and break the culture of corruption, our state would be a better place to live and raise a family.
During this past legislative session, lawmakers took great strides in tackling legal reforms. A few initiatives dealing with education and corruption also passed.
This past Monday it was truly refreshing to be in the front row and witness the tax reform effort launched that day. All spoke eloquently of the need to modernize and create a fair and broad-based code, where we quit picking winners and losers and create a growing, robust economy. Now the devil will be in the details.
If you live in West Virginia we tax your dog (not your cat), your lawnmower, your car and even your above-ground pool.
If you’re in business we tax your equipment, your inventory, and then, whatever profits are left.
The list goes on and on. Frankly, not much in our current tax code makes much sense.
We hear a lot about taking 10, 20 even 40-year-old ideas and just dusting them off because they still apply today. That’s nice to hear but it doesn’t meet current reality.
Other states are passing us by with robust economies created in no small part by addressing their own tax code issues.
Many of our misguided friends in West Virginia (who in the immortal words of Ronald Reagan “never knew a government program they didn’t like”) brag about how “fiscally responsible” we are. West Virginia continues to lose more population than any other state and has had the lowest workforce participation rate in the country since the Nixon administration.
Our state is a broken ship that is sinking, yet these folks don’t even realize we’re going down. It’s beyond time to take the bold steps needed with our tax code and keep our best and brightest here.
I was fortunate enough to meet and develop relationships with many of the governors that have instituted broad-based tax reform. Some like Pat McCrory in North Carolina have done well. Others, like my friend Sam Brownback in Kansas, have made some mistakes. West Virginia has a huge opportunity right now to fix a tax code gone awry. We must learn from other states successes and also their shortcomings.
In North Carolina, a joint study was conducted in 2013 by the Tax Foundation and the Carolina Business Coalition.
The first step in their action plan was to eliminate all tax credits.
Next the personal income tax was lowered from a top rate of 7.75 percent to 5.75 percent, with further reductions going forward, the goal being no personal income tax.
The latest CNBC rankings for America’s top states for business have North Carolina at No. 5 while West Virginia continues to languish at No. 48.
Kansas had the same goal of a zero personal income tax rate. The Kansas plan included a similar elimination of tax credits, followed by a reduction in income tax rates. Also included was immediate elimination of all income tax on partnerships and LLC’s.
This led to a huge inflow of business from its neighbors but also caused severe budget shortfalls when companies switched filing status to take advantage of a zero tax rate.
Lesson learned – You need a thorough and thoughtful study of all unintended consequences.
A recent poll conducted by our Center for a Brighter Future Inc. (www.cfabf.org) showed 98 percent of West Virginians favor small businesses and want to see them grow and prosper.
What better way is there to grow the economy than to help small business by making our tax code fair and simple?
Let’s do the right thing and create a system of taxation that is a true model for America!
Bill Maloney, a former Republican gubernatorial candidate, is founder of the Center for a Brighter Future think tank.