Editorial: Numbers

Prudent tax reform necessary to sustain growth of economy

The Register-Herald, July 9, 2004

The bottom line is not looking anything like the bottom for West Virginia state government.

State officials predict that various taxes and fees, coupled with lottery revenues, will result in $3.071 billion over the next 12 months, about $1 million more than required for the general revenue budget. The 2004-05 budget year began July 1.

Of course, similar forecasts were made the past two years. But a slow economy and rising costs, health care in particular, turned expected surpluses into feared shortfalls. That forced the state, which is mandated by its Constitution to have a balanced budget, to tighten its collective belt, and as a result, West Virginia ended the 2003-04 budget year with a surplus of nearly $61 million, two-thirds of which came from resurgent tax revenues.

Officials don't believe the current rosy outlook will turn sour in coming months.

"As we were heading into November of last year, we were concerned about the outlook for the entire year. That led to discussion over budget cuts," said Mark Muchow, chief administrator of revenue operations for the Department of Tax and Revenue. "But in the last three months, as a consequence of the growth in the economy and a robust energy market, things have turned around."

The bulk of the revenue is expected to come from personal income taxes (36 percent) and the consumer sales tax (31 percent).

"It's a fairly conservative estimate," Muchow said. "I feel fairly confident that we'll get there. There's little doubt that we will make the estimates this year."

The key words are "this year." For it appears Pennsylvania is about to join the gambling sweepstakes, which doesn't bode well for three West Virginia racetracks situated near the border with the Keystone State.

"Racetracks account for about 60 percent of lottery revenue, and 90 percent of racetrack activity is attributable to visitors from other states," Muchow said. Although lottery revenue accounts for less than 3 percent of West Virginia 's general revenue budget, that's the area where a shortfall would be felt first.

There are those who point to the benefits of lottery revenue, that it helps fund education, tourism and senior services programs. But there are others who say West Virginia should not stake any part of its economic future on gambling.

But that's not really the point here. The key is for the state to take advantage of what Muchow says is "the growth of the economy."

West Virginia has taken steps in recent years to become more business-friendly and attract investment and development. But there is still more to do.

The Legislature needs to look at some prudent tax reform. It needs to change the course of regressive taxes like the food tax, and others, so that people, including those the taxes hurt the most, will have more of their own money to spend, which will sustain economic growth and create an even broader tax base to support essential government services.