Last night, in his State of the Union address, President Obama asked Congress to pass an extension of the payroll tax cut without delay. The original tax cut, which reduced the employee share of Social Security taxes, expired at the end of 2011 and was extended for two months. Along with the payroll tax cut, Congress also passed a two month re-authorization  of extended federal unemployment insurance, which provides unemployment benefits to the long-term unemployed. 

We've brought up creating some sort of trust fund with the state's severance tax revenue time and time again, so it was good to read about state Republican legislators talking about a severance tax fund in the Gazette this morning. However, it was disappointing to see that their proposal was to use a severance tax fund to finance business tax cuts, rather than building a permanent source of sustainable wealth. << MORE >>

When we last talked about growing income inequality, the CBO had released a report showing that incomes for the richest households in the U.S. have been growing much faster than the incomes of the poor and middle class. Another study, this time from the Congressional Research Service (CRS), has confirmed that income inequality is on the rise in the U.S. << MORE >>

While the state should be doing all that it can to stimulate economic growth and jobs, cutting business taxes is  an inefficient, regressive, and poor choice for creating broadly shared prosperity. As Sean has pointed out, they are much better ways to accomplish this goal.

As AP points out today, the corporate net income tax will fall to 7.75% this year and the business franchise tax will be eliminated by 2015 (see chart below).



In terms of inefficiency, the business tax reductions will likely offer little in terms of creating new jobs or in enticing new businesses to locate in the state. Also, there is no guarantee that business (mostly large out of state businesses pay corporate taxes) will reinvest that money or hire people in West Virginia. << MORE >>

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Today, the Washington Post had a insightful op-ed highlighting the large and critical role federal spending played in the boom in shale gas drilling:

Many often point to the shale gas revolution as evidence that the private sector, in response to market forces, is better than government bureaucrats at picking technological winners. It’s a compelling story, one that pits inventive entrepreneurs against slow-moving technocrats and self-dealing politicians.

The problem is, it isn’t true.

The breakthroughs that revolutionized the natural gas industry — massive hydraulic fracturing, new mapping tools and horizontal drilling — were made possible by the government agencies that critics insist are incapable of investing wisely in new technology.

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Today's Daily Mail had an article about a proposed tax incentive designed to lure a potential "ethane cracker" to West Virginia. The proposal would reduced the assessment rate for property taxes from 60% to 5% for the cracker facility. This would dramatically lower the facility's property tax burden, to the tune of about $500 million over the next 25 years. << MORE >>

In his column this morning Phil Kabler briefly noted that the result of capping the state's contribution to retiree health insurance was "that the burden was shifted onto current and future retirees." This is something I wrote about last week, so it was nice to see this basic point acknowledged in print. Another point that has been absent from the debate on OPEB is how much in compensation public employees will lose because of PEIA's decision to cap the retiree subsidy provided by the state.

The chart below provides some estimates.

In FY 2011, the state is estimated to pay approximately 67 percent or $148 million of total retiree health care costs, while retirees will pay about 33 percent or $72 million. << MORE >>

Last night the Charleston Area Alliance hosted a discussion between Senator Brooks McCabe, PEIA director Ted Cheatham, and yours truly on how to address the state's growing OPEB (other-post employment benefits) liability. As readers may know, we published a lengthy report on how the state should handle this problem back in January. I do not have much more to add to the discussion that was not in our report, but uploaded here are some of my notes from the event.

One thing that I stressed at the event was that the state should not overreact to the OPEB liability by completely per-funding it. << MORE >>

As many readers may know, we've been pushing the idea that one of the best ways our state could create jobs today would be to issue bonds for much needed investments in infrastructure and schools. This idea is not new. If fact, other states have already implemented this policy as way to boost job creation and save money over the long-term. Writing in Bloomburg Yesterday, policy guru Ezra Klein makes a solid case for increasing federal spending on infrastructure that applies equally at the state-level. << MORE >>