WASHINGTON — On the heels of last week’s failed attempt to repeal former President Barack Obama’s health care law, West Virginia conservatives are optimistic the U.S. Congress can pass a new tax policy that will bring economic growth to the state.
President Donald Trump and congressional Republicans unveiled their framework for tax overhaul last Wednesday. The plan includes simplifying the income tax structure from seven brackets with rates ranging from 10 percent to 39.6 percent to three brackets of 12 percent, 25 percent and 35 percent. The income levels of those rates were not announced in the plan.
The estate tax would also be eliminated, and the personal exemptions for children would be eliminated in exchange for a higher child tax credit.
The proposal would also lower the corporate tax rate from 35 percent to 20 percent.
U.S. Rep. Evan Jenkins, R-W.Va., called the plan “very encouraging” during an appearance on last Thursday’s MetroNews “Talkline.”
“What this does is a middle-class tax cut, simplification, job creation, more money in the pockets of hard-working West Virginians,” he said. “It’s a good starting point that we have now. The House (of Representatives), the Senate and the White House are all in general agreement with the framework. We didn’t have that under health care reform.”
U.S. Sen. Shelley Moore Capito, R-W.Va., said she was excited about what changes to the tax policy could bring to the state.
“The main thing the people in West Virginia want is a good job,” she said on the Senate floor Wednesday. “But a good job with more pay, more take-home pay and a higher wage is exceedingly important to the families that I represent.”
Capito cited an Economic Innovation Group report during her address which stated most of the economic growth in recent years has happened in local economies rather than nationally. Two out of every five communities categorized as in economic distress saw job growth during the national economic recovery.
“The truth is that most of our country has been mired in economic stagnation. We’ve just been standing still,” she noted.
According to the 2017 Distressed Communities Index, more than 34 percent of West Virginians live in ZIP codes deemed in economic distress. Around 3.4 percent live in prosperous communities.
“It has been 31 years since our tax code was updated,” McKinley tweeted, referencing the Tax Reform Act passed under President Ronald Reagan.
Jason Huffman, the state director of Americans for Prosperity-West Virginia, said changes are needed to stimulate economic growth and remove clauses preferred by certain groups.
“The last time that Congress attempted and succeeded in reforming the tax code was 30 years ago,” he said. “Since then, special interests have lobbied for special treatment and carved out loopholes in the tax code that favor the politically connected over the average American.”
While the proposal is far from finalized, Huffman said it is the foundation for a plan that could result in job creation and increased consumer spending.
“We have, among the industrialized world, one of the highest corporate tax rates,” he added. “If you talk about the corporate tax side, lowering our rate around 20 percent would bring jobs back to America. That’s the key critical part of this.”
According to the U.S. Congressional Budget Office, the United States has the highest statutory corporate tax rates among the developing nations that make up the Group of 20 at 39.1 percent. The country’s average corporate tax rate — 29 percent — and effective corporate tax rate — 18 percent — are among the highest among the G-20 countries.
While the framework is far away from becoming law, it would most likely benefit the wealthiest Americans more than others. That is according to a preliminary report from the Tax Policy Center.
The organization noted that people with the highest incomes would receive the largest tax cuts. The report also said government revenue would be reduced by $2.4 trillion dollars between 2018 and 2027.
Sean O’Leary, the senior policy analyst at the West Virginia Center on Budget and Policy, said the monetary loss could result in spending cuts that would hurt the middle class.
“This is a pattern that we’ve seen in that we’ve had massive tax reform and we’ll add to the deficit and then we use that increase in the deficit to justify spending cuts somewhere,” he said.
“Forcing cuts into Medicaid, forcing cuts to education, forcing cuts in job training. Those are the things that help the middle class and lower-income individuals and families.”
O’Leary said also cutting the corporate tax rate would do nothing to benefit middle-classes West Virginians.
“That usually benefits corporate shareholders. They usually pick up those savings,” he said.
O’Leary added if lawmakers wanted to pass tax reform that would benefit working families, they should look at increasing the number of taxpayers that could apply for an earned income tax credit, which reduces the amount of tax low-income families pay. For some individuals, it could mean not filing taxes at all.
“If we want a tax reform that benefits the middle class and puts more money in the hands of working families that need a boost, the earned income tax credit is where it’s at,” he said.
U.S. Sen. Joe Manchin, D-W.Va., commended Trump for publishing the plan, saying in a statement to MetroNews he believes Congress can work together in passing a tax policy that pleases Republican and Democratic lawmakers.
Manchin visited the White House on Sept. 13 to discuss tax reform with the president, six other senators and members of the Trump administration.
The senior senator did not sign a letter among Democratic senators setting the conditions for discussing tax policy, in which on provision included not supporting a plan that adds to the deficit.