blog.wvpolicy.org

The Middle Class Creates Jobs, Not Business

Ted Boettner — 2012-05-17T20:07:05Z

Brad Delong sends us to this great speech (and presentation) from venture capitalist Nick Hanauer, which was recently banned from TED. More on that here.

His remarks remind me of the Robert Reich axiom: You can't have a strong economy without a strong middle class. While businesses and the 1% love tax cuts, it has more to do with rent-seeking instead of economic growth.

What could tax reform look like?

Sean O'Leary — 2012-05-16T20:12:36Z

The clarion call for tax reform continues to sound in West Virginia, as the business community continues to rail against the state's business personal property tax, regardless of a lack of evidence.

So what would tax reform look like in West Virginia? First, let's go ahead an eliminate the business personal property tax.We know that the business personal property tax brings in about $250 million in revenue. While most of property tax revenue goes to local governments, for simplicity's sake, I'm going to treat all revenue together, and assume distribution issues would be dealt with later (hey, it works for the Tax Department).

But let's not stop there, let's get serious about tax reform.

1,500 Coal Mining Jobs Created Since Obama Took Office (Updated)

Ted Boettner — 2012-05-12T19:50:05Z

Over at Coal Tattoo, Ken Ward has a must read piece on why state politicians and the media avoid having a balanced discussion regarding the impact of the coal industry. One of the central reasons why our state is unable to have a rational discussion is the propaganda and inflammatory rhetoric coming from the coal industry.

According to the narrative, there has been a growing "war on coal" ever since President Obama took office in 2009 and the EPA began cracking down on mountain top removal mining permits. According to industry front groups such as Faces of Coal, West Virginia is smack in the middle of "Obama's NO JOB ZONE," as see in this billboard along Interstate 64.

1,500 Coal Mining Jobs Created Since Obama Took Office

Ted Boettner — 2012-05-11T21:05:09Z

WV Share of U.S. Coal Production - One Chart

Ted Boettner — 2012-05-10T20:58:53Z

Source: www.wvminesafety.org/historicprod.htm and www.eia.doe.gov/emeu/aer/txt/stb0702.xls

Tax Reform Rhetoric Doesn't Match Reality

Sean O'Leary — 2012-05-10T16:53:33Z

The specter of job killing property taxes in West Virginia reared its head again this week, with the cry for tax reform coming this time from outgoing Bayer CEO Greg Babe, as he presented to Charleston Area Alliance's 2012 Annual Celebration, reported by the Daily Mail.

The Daily Mail rehashed Mr. Babe's argument, debunked once before here, in an editorial this morning. Once again zero evidence was offered for the contention that West Virginia's business personal property tax is a significant deterrent to investment and economic development in the state, particularly for manufacturing.

This time, the Daily Mail also insinuated that Shell's decision to locate a cracker facility in Pennsylvania was due to the business personal property tax.

WV Corporate Taxes On Track for 22-year Low

Ted Boettner — 2012-05-10T16:49:46Z

As Sean pointed out in a recent Charleston Gazette commentary, the decline in corporate net income tax and business franchise tax collections is threatening programs such as Medicaid. With this in mind, let's take a historical look at the growth these two taxes.

As the chart below shows, revenue from the CNIT/BFT is expected to hit a 22-year low in FY 2012, dropping from $221.5 million in FY 1990 to just $173.5 million in FY 2012. It is important to recognize that these are nominal numbers, they are not adjusted for inflation or economic growth.

Shrinkage in the Labor Force

Ted Boettner — 2012-05-08T15:11:46Z

There has a been a lot of chatter about the shrinkage in the U.S. labor force. Brad Delong takes us to two fed studies and Rorty Bomb provides the analysis. This graph from Ezra Klein shows the long-term and accelerated decline in labor force participation:

As the graph points out, the labor force participation rate in the U.S.

One More Look at Gestamp Deal

Ted Boettner — 2012-05-06T20:38:11Z

George Hohmann does a great job breaking down the Gestamp deal in his Sunday column. (see here and here for background info). Hohmann makes the following observations:

* It can be argued that without incentives, Gestamp would not be coming to South Charleston and the stamping plant would remain idle.

* The $25 million in loans the state has agreed to extend to Gestamp presumably will be paid back over time, so they are not a gift.

* Although O'Leary estimates the incentives will save Gestamp $12.5 million in property taxes, the company and the Kanawha County Commission will likely come to terms on a payment in lieu of taxes, or PILOT, whereby the company would agree to make payments to the county to help fund essential services like schools.

* If Gestamp agrees to pay the county about 70 percent of what it would normally owe in property taxes, to cover schools, the value of the incentive package would be reduced by about $8.7 million.

Gestamp Deal Worth Estimated $84.4 Million

Sean O'Leary — 2012-05-03T23:20:52Z

On Wednesday, the Daily Mail reported on the tax incentives offered to Gestamp, the auto parts company that is re-opening the stamping plant in South Charleston. Recently, we looked at the B&O tax incentive, but now with this memo of the agreement between the state and Gestamp, we can take a closer look.

The highlights of the agreement include that Gestamp's corporate net income tax liability will be zero for at least 13 years, as will their business franchise tax liability. They will also pay no personal property taxes due to the WVEDA holding title on their equipment and the activation of the foreign trade zone.

Disinvestment in Higher Ed is Damaging OUR Future

Ted Boettner — 2012-04-30T14:25:26Z

A new report by our friends at Demos finds that "state disinvestment in public higher education over the past two decades has shifted costs to students and their families." As readers may know, this is something we've looked at before (see here and here). From 1991 to 2011, total state support for higher ed has dropped from $8,608 per full-time student to $6,360 after adjusting for inflation (2010 dollars).

In West Virginia the drop in state support for higher ed per student has not been as dramatic, falling from $7,544 to $6,254, over the 20 year period. However, these figures do not reflect that tuition at 4-year and 2-year colleges has far outpaced inflation, growing by 112 percent and 71 percent respectively from 1991 to 2011.

The growth in tuition has caused student debt to skyrocket. Nationally, student loan debt has grown from $119 billion in 1999 to $541 billion.

Why Not Drug Test State Funded Job Training?

Ted Boettner — 2012-04-25T03:49:39Z

Today the Governor officially ordered Workforce WV to begin drug testing those enrolled in job training programs (see below press release). What was not mentioned was that these programs are completely funded by federal dollars and that they mostly go to the "disadvantaged and at-risk youth, adults, and dislocated workers."

However, the big question is why didn't the Governor include the state's only taxpayer funded workforce program - the Governor's Guaranteed Work Force Program - in his executive order on drug testing? While we are big fans of this program - and not to mention that we think it needs significantly more investment - it is mostly a subsidy to large businesses. Oh, that might explain it.

More to come...

For Immediate Release
April 24, 2012
Contact: Amy Shuler Goodwin
304-558-4977
GOVERNOR TOMBLIN HOLDS ROUNDTABLE DISCUSSION WITH WHEELING AREA BUSINESS LEADERS
Gov.

Job Killing Medicaid Cuts in the Ryan Budget

Sean O'Leary — 2012-04-24T01:52:18Z

West Virginia could lose tens of thousands of jobs over the next five years if Congress enacts the major cuts to Medicaid as proposed by Rep. Paul Ryan and passed by the House of Representatives last month.

According to a report from the Economic Policy Institute, the $544 billion in Medicaid cuts in the Ryan Budget over the next five years are a real job killer, both nationally and in West Virginia.The EPI estimates that these cuts would cost the economy roughly 862,000 jobs in 2014 and that annual job loss would rise to nearly 1.5 million in 2017, costing the economy nearly 5 million jobs in total.

Source: Economic Policy Institute

Because of Medicaid's low overhead, the cuts will slow spending on goods and services, such as food, nursing home care and health services, making the these job losses overwhelmingly from the private sector.