Read the report The state Senate recently passed two bills reducing business taxes that could cost $531 million in tax revenues over 10 years. The bills are now before the House Finance Committee.

"High Costs, Dubious Benefits," a study released on Tuesday by the West Virginia Center on Budget and Policy, concludes the proposed cuts, in addition to other corporate tax cuts passed in the past two years, could cost the state budget more than $1.2 billion by 2019.

The cuts might require West Virginia state government to cut a wide variety of services or increase taxes paid by individual citizens.

Ted Boettner, director of the Center on Budget and Policy, said, "Cutting business taxes may be the most politically popular approach for politicians during an election year.

"[But] the long-term consequences could prove devastating to the state's ability to provide the quality infrastructure and services that businesses need to thrive and that we all depend on."

Services could be cut in education, health care, transportation, public safety, teacher salaries, road maintenance and medical care payments to doctors and hospitals.

Recent experiences in other states show problems that could occur here.

"States like Michigan and Maryland that cut taxes in the late 1990s experienced huge budget shortfalls recently," Boettner said. "West Virginia could do the same if the state Legislature is poised to cut more business taxes."

Cuts in business taxes do not necessarily pay for themselves by increasing business growth.

The center's new report cites two recent studies about Oregon and California that conclude every $100 cut in state business taxes resulted in increases in economic activity of only between $16 and $18.

 Read the report The state Senate recently passed two bills reducing business taxes that could cost $531 million in tax revenues over 10 years. The bills are now before the House Finance Committee.

"High Costs, Dubious Benefits," a study released on Tuesday by the West Virginia Center on Budget and Policy, concludes the proposed cuts, in addition to other corporate tax cuts passed in the past two years, could cost the state budget more than $1.2 billion by 2019.

The cuts might require West Virginia state government to cut a wide variety of services or increase taxes paid by individual citizens.

Ted Boettner, director of the Center on Budget and Policy, said, "Cutting business taxes may be the most politically popular approach for politicians during an election year.

"[But] the long-term consequences could prove devastating to the state's ability to provide the quality infrastructure and services that businesses need to thrive and that we all depend on."

Services could be cut in education, health care, transportation, public safety, teacher salaries, road maintenance and medical care payments to doctors and hospitals.

Recent experiences in other states show problems that could occur here.

"States like Michigan and Maryland that cut taxes in the late 1990s experienced huge budget shortfalls recently," Boettner said. "West Virginia could do the same if the state Legislature is poised to cut more business taxes."

Cuts in business taxes do not necessarily pay for themselves by increasing business growth.

The center's new report cites two recent studies about Oregon and California that conclude every $100 cut in state business taxes resulted in increases in economic activity of only between $16 and $18.

Other recent cuts include last year's food tax reduction from 6 percent to 5 percent and upcoming reductions down to 3 percent.

Gov. Joe Manchin and West Virginia Chamber of Commerce President Steve Roberts have both backed business tax cuts.

Larry Matheney, secretary-treasurer of the state AFL-CIO, said Tuesday, "Even though we recognize the need for business growth and a good business climate, we must be aware of the impact tax reductions have when we pull millions of dollars out of the state budget.

"Will there be less money available for education, for services to the elderly and the weak? Do reductions in corporate taxes bring in new businesses to offset that reduction? It is doubtful," Matheney said.

Boettner said, "If all these bills are enacted and taxes are not raised we could be heading toward a fiscal train wreck in the near future."

The governor's Rainy Day Fund and other state reserve funds totaled about $682 million at the end of last year.

Boettner said those reserves could drop 60 percent by 2013 if they are used to counter budget shortfalls even before proposed cuts in corporate income and in business franchise taxes would take full effect in 2014.

"The vast majority of the tax savings," the study adds, "are likely to flow to out-of-state owners of corporations, partnerships, and limited liability companies and make the overall West Virginia tax system more regressive."

The West Virginia Center on Budget and Policy is a nonpartisan, nonprofit research organization that focuses on how policy decisions affect all West Virginians, especially low- and moderate-income families.

To contact staff writer Paul J. Nyden, use e-mail or call 348-5164.