In the weeks leading up to Tax Day, WalletHub calculated the proportion of total income that residents pay toward their state and local tax obligations. According to WalletHub's findings, West Virginia has the 15th highest state and local tax burden in the United States.
West Virginians spend 9.18% of their total personal income on paying property taxes, individual income taxes, and sales and excise taxes, according to the report. New York has the highest tax burden at 12.97% and Alaska has the lowest tax burden at 5.10%.
Unfortunately, this does not tell the whole story. To get an accurate picture of the tax burden West Virginia places on its citizens, one has to look at the overall tax landscape. When you see the full tax panorama, it becomes quite evident that West Virginia is not a tax friendly state.
West Virginia is one of the few states in the country that have a personal income tax, corporate income tax, business and occupation tax, and a sales and use tax. Such a tax structure means West Virginians are being taxed on the same income multiple times regardless of the source of the income.
For example, say you are the owner of one of the approximately 114,000 small businesses in West Virginia. Before the business realizes one cent of profit, and the business is located within a municipality, the gross income of the business (income not including deductions for salaries, benefits, or expenses) is subject to a municipal business and occupation tax. Next, depending on how the business is structured, it is either taxed at the corporate income tax rate or the personal income tax rate. Last, the small business owner is required to pay the state sales and use tax on the income they receive from their small business to purchase goods and services.
Employees of that same small business would have their income taxed at least twice. Once when it is earned and again when that employee's income is used to purchase goods and services (of course this is all after the federal government takes their cut).
Typically, states make an informed decision to select one taxing regime over another to prevent double and triple taxation. For example, Washington State levies a business and occupation tax but does not have a corporate or personal income tax. Tennessee collects a sales and use tax but has no personal income tax. On the other hand, most states have both a corporate income tax and a personal income tax but do not levy a business and occupation tax.
West Virginia's multi-layered tax structure guarantees that those working and living in the Mountain State will have their income taxed multiple times.
Furthermore, all of the taxes mentioned previously are in addition to the various taxes and fees that West Virginia and its political subdivisions levy on other activities such as purchasing gasoline; renewing a vehicle's registration; transferring real property; parking downtown; applying for or renewing a business license; and the list goes on. West Virginians are taxed at every turn.
Unfortunately, the problem is only getting worse. The excise tax on fuel has recently increased and will continue to increase; vehicle registration renewal fees are now double what they used to be; municipalities are increasing their user fees; counties now want to add their own sales and use tax on top of the state and municipal sales and use tax; and counties continue to ask for excess levies. It will only be a matter of time before the West Virginia Legislature allows counties to impose their own separate business and occupation tax.
Something has to give. Unfortunately, the West Virginia Legislature thinks that something ought to be the taxpayer. West Virginia is the 38th most populous state, and it has the 15th heaviest tax burden and is next to last in per capita income.
If West Virginia has to come back year after year to increase taxes on residents to fund the government with no discernible benefit to residents in the type or amount of services provided by that government, perhaps the state has a spending problem, not a revenue problem. Specifically, too much bureaucracy, too much administrative overlap, too many counties, too many school districts, too many politicians who are long on promises and short on results, and not enough leaders who understand the tax burden their constituents must pay for their inability to manage the state in a fiscally responsible way.
Nigel E. Jeffries is a resident of Charleston.