By GIL WHITE
Governor Justice’s plan to slash West Virginia’s personal income tax in half is exactly what small businesses need right now.
Main Street has gone through the wringer these past few years. Local businesses have endured a pandemic, supply chain and labor issues, and inflation that’s driven up the cost of everything from raw materials to customer receipts.
This might not make sense at first, because Governor Justice isn’t asking the legislature to reduce the corporate tax rate, but most small businesses actually pay taxes at the individual tax rate. That’s because they’re organized as pass-through entities, meaning any profit passes through the business to the owner, who pays taxes at the personal rate.
If the governor can convince the legislature to vote “yes” to his plan, it could make a big difference to many struggling businesses. They may be able to finally replace old, worn-out pieces of equipment, increase wages, and, in some cases, keep the doors open.
Some members of the House and Senate argue the state can’t afford to cut income taxes by 50 percent, but West Virginia ended the last fiscal year with a budget surplus of $1.4 billion. That means the state’s already collecting more money from us than it knows how to spend. In his State of the State Address the other night, Governor Justice stressed that the surplus means the state can afford to cut taxes without needing to make up the difference someplace else.
He said, “We’ve got surpluses that are off the chart,” and he’s right.
We don’t know exactly how much taxpayers would save every year under Governor Justice’s plan, but in his speech, the governor estimated it would be around $1 billion. In turn, that savings would lead to additional spending – and additional sales tax revenue – as people and businesses use the money to buy more goods and services.
As the governor told lawmakers in his State of the State Address, by passing his income tax plan, “You will become your own stimulus package.”
And Main Street could use a good stimulus package right now.
Big corporations get most of the headlines, but small business is really the engine that drives West Virginia’s economy. According to the U.S. Small Business administration, 98.8 percent of all businesses in the state are small businesses. Over the past 2½ years, however, supply chain issues and a lack of job applicants have forced many of these Main Street businesses to scale back on their offerings and reduce their hours of operation. Inflation has forced many of them to absorb any price increases or risk driving customers away by charging more.
By easing the financial pressure on these Main Street businesses, the legislature can help clear a path for them to fully recover from the recent economic setbacks so they can grow and create jobs and keep their communities strong.
And that’s important because when we help small businesses, we help everyone.
