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West Virginia has been hemorrhaging population over the last decade, and Governor Jim Justice has an idea to turn it around. The Republican governor wants to reduce the state's personal income tax by 60%. He and some other leading Republicans at the Capitol hope this plan will bring in thousands, if not hundreds of thousands of new residents. Dave Mistich of West Virginia Public Broadcasting gives us a look at the plan and whether it could work.
DAVE MISTICH, BYLINE: In rolling out his plan earlier this month, Governor Jim Justice referred to maps and charts. According to the Census Bureau, West Virginia is the only state that lost population overall since 1950. All others have grown. But now Governor Justice says this is the moment to turn that all around, especially with such a successful vaccine rollout here.
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JIM JUSTICE: The spotlight of the world's on West Virginia right now. Absolutely we know from the standpoint of how we've handled COVID and how we've handled the economics of COVID, really and truly, we have knocked it out of the park.
MISTICH: The governor's income tax reduction plan, formally introduced by the legislature last week, would cost the state nearly a quarter of its general revenue budget. To account for that revenue loss, Governor Justice has proposed massive hikes on tobacco, alcohol and soda. And most notably, the proposal would bump the consumer sales tax from 6% to 7.9%, making it the highest base rate of any state in the nation. Governor Justice says it would be a net win for taxpayers that would provide much needed economic growth in a state that's seen the decline of the once-dominant coal industry. He also dreams of another win for the state that he's promoted under the tax reform plan.
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JUSTICE: I really, really believe that there is a real chance of landing real entertainment, landing, you know, the next Disney, the next Dollywood.
MISTICH: But the state's Chamber of Commerce says Justice's sweeping proposal misses the mark.
STEVE ROBERTS: I think that the proponents of the current plan might simply have overlooked or underestimated the impact of these proposals on businesses.
MISTICH: That's West Virginia Chamber President Steve Roberts. Among other concerns, he takes issue with the proposed increase to the consumer sales tax, especially considering that higher populations are concentrated in many of the state's border counties.
ROBERTS: We want to do everything we can to keep those purchases in West Virginia. And if we adopt a sales tax rate that would make our state sales tax so much higher than surrounding states, we're afraid that people will find the incentive to run next door to do their shopping.
MISTICH: Where people spend their money is one thing. Getting them to come to West Virginia in droves by reducing the income tax, as the governor hopes, is a whole 'nother ballgame. Jared Walczak is vice president of state projects at the Tax Foundation.
JARED WALCZAK: Some states do extraordinarily well and are extremely competitive with low or no income taxes, but it's not a panacea that solves every last one of your problems in attracting people for growth.
MISTICH: Justice points to states like Florida, Tennessee and Texas as growing their populations at least in part by lowering their tax burdens, including personal income taxes. But Walczak remains skeptical that West Virginia could bring in people on a scale that Governor Justice and other Republican leaders are hoping for.
WALCZAK: West Virginia can accomplish some of that as well, but you don't want to be banking on hundreds of thousands of people moving into the state.
MISTICH: Where the governor's plan goes now, though, is in the hands of lawmakers. Leaders in the GOP-led Senate are on board, but top Republicans in the House of Delegates say they're willing to reduce the personal income tax, just not at the expense of other drastic hikes.
For NPR News, I'm Dave Mistich in Charleston, W.Va.
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