FAIRMONT — West Virginia is the place to do business. That's the message lawmakers have worked hard to spread as the state moves forward with policies and initiatives to encourage businesses to come to the Mountain State.
The initiative is collectively known as “Choose West Virginia.” Department of Economic Development Secretary Mitch Carmichael said the initiative is a comprehensive effort that spans a variety of efforts, from legal reform to judicial reform, regulatory reform and education reform, aimed at creating an environment conducive to attracting business to West Virginia. He said that it was a significant initiative. The initiative also has a sales arm that promotes West Virginia's benefits to national and international companies.
And it seems to be working. LG Electronics announced a $700 million investment in the state earlier this month. But despite the initiative's success in bringing business to the state, one question remains. What's the best way to translate that success into real-world benefits for average West Virginians?
“Many of these announcements are being made in border counties, and only in a small number of counties within the state,” said Sean O'Leary, senior policy analyst at the Charleston-based West Virginia Budget and Policy Center. It has not been done.” “For most people, that means the economic growth they generate won't be shared broadly across the state. It will be concentrated in a small region and shared with Ohio, Maryland and Pennsylvania. It will be.”
In other words, O'Leary argued, it doesn't mean much to the typical West Virginian. In a fact sheet released by the center on Jan. 9, O'Leary examined job growth across the state as the state recovers from the pandemic. Although total employment is almost back to pre-pandemic levels, there are wide variations across states.
Most of the increase is occurring in a small number of counties, but 18 counties remain below pre-pandemic levels. Conversely, Cabell, Hampshire and Jefferson counties had 1,000 more employees than before the pandemic. Two of those counties accounted for more than twice her share of the state's net job growth.
Benefits from where economic development is announced will be concentrated in a narrow region or shared with border states, the report concludes.
On the tax front, Mr. O'Leary is wary of cutting taxes as a way to encourage business development.
“When we give them these huge tax breaks, it's like we're rewarding them for something they were going to do anyway,” O'Leary said. .
He said businesses were already looking for flat land, infrastructure and access to rivers, which was also found in the areas where business development announcements were made.
Still, companies are coming to the state and investing. But West Virginia University economist John Deskins said states need to invest in human capital, meaning they need to invest money to ensure people have enough education and health to form a strong workforce. He warned that if he didn't do so, “Choose WV” marketing could be boring for businesses moving here. empty.
“If an employer comes here and says, 'We looked at West Virginia, but we had a hard time with drug testing,' that would hinder economic development,” Deskins said. “That would be a hindrance to attracting business to the state.”
Now let's get back to taxes. Without tax revenue, governments cannot spend on things like health care and education, which are essential to maintaining a strong workforce. That's why O'Leary is skeptical about continuing the tax cut, despite the rationale that the income tax cut could attract more people to the state to replace those who left.
He said the tax cuts missed the real reasons people moved, which were more for personal reasons than economic incentives. Moreover, the state's history of large-scale tax cuts does not paint a rosy picture for public investment.
“Ten years ago, we enacted massive corporate tax cuts,” O'Leary said. “It costs up to $500 million a year. Those costs were mostly paid for when, as luck would have it, natural gas prices rose. Although severance taxes made up for some of that loss. , we cut higher education every year. And when we finally got a stable budget, we didn't put any of that money back into higher education.”
He said higher education tuition increases due to funding cuts to higher education led to an increase in student loan debt, resulting in the highest student loan default rate in the country. Furthermore, the corporate tax cut did not lead to explosive employment growth, and in fact, the state's employment growth rate was the worst in the country.
The state's income tax rate cut is too new to be certain, but O'Leary doesn't expect the outcome to change.
Mr Deskins said finding a balance between pro-business policies and public investment was a central discussion among policymakers.
“We don't want to put an excessive burden on businesses or residents, because if the tax burden is too high, the people will distance themselves from the state,” he said. “So, really, they have to find the right balance between low taxes and adequate investment in things like education, health promotion and public infrastructure.”
Sam Workman, director of the WVU Institute for Policy Research and Public Affairs, agrees on one point in particular. It is too early to tell what impact these policies will have on economic development. After all, it's not just about developing a business blindly.
The governor's office is also trying to move the state toward a more modern economy. We will need time for the transition to develop before we know what exactly that means for the average resident here.
“When you have an economy that's changing rapidly and, in some cases, completely collapsing a community, you have to put out a lot of fires at once,” Workman said. “We need to understand that all of this is happening in the context of a major transition, and we are only now beginning to understand how these policies are likely to impact the state’s future economic destiny.” I think it's starting to happen.”
Workman added that party ideology also means different paths are pursued when it comes to policy making. Republicans typically prioritize business over human capital.
Mr. Carmichael pointed to plans to make tuition free in the community and trade school systems as recognition of the need to invest in human capital. After all, the role of government is to collect the minimum amount of money from taxpayers at a rate that provides the most efficient service possible.
He argued that even at current levels there is sufficient funding to achieve these goals.
Carmichael also responded to criticism that development is limited to border counties. He noted that a state's physical geography plays a role in determining how companies make decisions about where to do business. West Virginia is a small state with easy access to neighboring states, making border counties even more attractive. Additionally, border counties account for 33 or 34 of the total 55 counties. The presence of major railroads and river highways causes businesses to concentrate in certain areas to take advantage of those systems.
“Just like a rising tide lifts all boats, when we are growing economically and we take it to its logical conclusion, we say, “What if we don't have jobs or opportunities?'' How are people going to get jobs and opportunities?’ Companies will hire them,” Carmichael said.
He argued that without such opportunities, there is no way to provide a better life for the people.
Moreover, he added, this is an opportunity to bring the nation competitive in the 21st century. The state's traditional economy is rooted in heavy metals, mining, and other forms of manual labor. To lead the nation into the future, we need to embrace the innovation economy and bring in businesses that specialize in those areas.
Carmichael argues that diversifying the state's economy will ensure more people have the opportunity to excel.
Still, O'Leary issued a warning. He cited income tax cuts as an example of something that was touted as beneficial to everyone. But the richest 20% receive thousands of dollars in savings, he noted, while the average resident only receives $80 each year. He noticed a similar pattern playing out when looking at the Choose WV initiative.
“It hasn't reached the whole state yet,” he said. “And for the typical West Virginian who looks at their paycheck and thinks they're going to get an extra $3 a week, that's not really a reduction in terms of improving their lives. Childcare, high school. We could also invest in education, paid sick leave, and other investments in our workforce. Let's make it a better place to work than a tax-friendly place.”
