WVU Expert: Savings important to state’s long-term economic growth

Many energy-producing states around the country, including West Virginia, are in budget trouble as revenues from extractive industries are sinking. Lawmakers in Charleston are debating which tax reforms will plug a $600 million hole, including eliminating the personal income tax and increasing the consumer sales and service tax. West Virginia University Bureau of Business and Economic Research Director John Deskins explains the economic distinctions in the effects of those two types of taxation.

“The difference is savings,” Deskins said. “Under a consumption tax only the money you spend on ‘stuff’ is taxed; all the money you save is tax free until you spend it in the future.”

Deskins said savings is important to long-term economic growth.

Opponents of raising the sales tax argue that it hurts lower income people who typically must spend what they earn on goods and services.

“That’s the tradeoff policymakers have to face,” Deskins acknowledged.

Deskins said economists generally accept that a broad tax base with a lower rate is better than a higher rate and a narrower base.

He can be reached at 304.293.7876 or by email at john.deskins@mail.wvu.edu.

Gov. Jim Justice has proposed raising the per-pack tax on cigarettes by 50 cents and a 1-cent per ounce tax on sugary drinks.

Higher taxes on those products can also affect health outcomes for state residents.

“A tax increase has the very real potential to reduce tobacco use among both adult and adolescent users, and to subsequently reduce rates of tobacco-related disease and death,” said Dr. Melissa Blank, assistant professor of behavioral neuroscience in the Department of Psychology.

Blank researches the primary determinants and consequences of smoking behavior using human models of drug dependence.

She can be reached at 304.906.8109 or by email at mdblank@mail.wvu.edu.

"Two of the major behavioral factors that detract from health are cigarette smoking and the intake of processed sugar," said Dr. Jeff Coben, interim dean of the WVU School of Public Health.

According to Coben, smoking cost West Virginia more than $2 billion dollars last year in health care expenses and loss of workforce productivity. Health experts estimate that each pack of cigarettes sold in the state saddles state taxpayers with over $7 in healthcare costs. 

West Virginia is the leading state in the country in rate of obesity, Coben said. Obesity is a leading risk factor for diabetes, a disease that costs us $2.5 billion in health care costs every year, he continued.

Coben can be reached at 304.293.2362.

WVU also has an expert in carbon taxes, which are intended to reduce carbon emissions.

West Virginia University experts can provide commentary, insights and opinions on various news topics. Search for an expert by name, title, area of expertise, or college/school/department in the Experts Database at WVU Today.

 

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