Tax policy is of utmost importance for economic growth and prosperity.
For instance, one particular side effect of bad tax policy known as a "tax inversion" - a process in which a U.S. company relocates its headquarters to take advantage of lower tax rates internationally - has been a hot-button topic.
In West Virginia, we have long seen companies and individuals move to other states to lower their tax burden. This type of regional tax inversion has had a devastating effect on the economy of our state over the years.
We can all name companies that were mainstays of our local economy that have moved just across the border for various reasons including tax, such as Appalachian Power and Mylan Pharmaceuticals.
According to the Tax Foundation, there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax or the sales tax.
Wyoming, Nevada and South Dakota have no corporate or individual income tax. Alaska has no individual income or state-level sales tax. Florida has no individual income tax. New Hampshire and Montana have no sales tax.
Other states have moved their tax rates down in recent years. North Carolina has made huge improvements in its tax code in 2015, which will put added pressure on West Virginia as a regional competitor for entrepreneurs and corporate expansions.
The state's largest improvement was in the individual income tax, where legislation restructured the previously multi-bracketed system with a top rate of 7.75 percent to a single-bracket system with a rate of 5.8 percent and a generous standard deduction of $7,500.
They are also planning further improvement next year as the rate is expected to decrease again to 5.75 percent.
The corporate income tax rate in North Carolina is also phasing down. The rate fell from 6.9 percent last year to 6 percent this year. The rate is subject to a trigger mechanism that will further reduce the rate in future years when state general fund revenues are healthy, to as low as 3 percent by 2017.
North Carolina also simplified sales tax filings from both the state and local governments.
In this hypercompetitive environment to spur economic growth and job-creation, what are some healthy adjustments we can make to our tax code?
First, eliminate one of the three major taxes in the state: income, corporate or sales. They each have advantages and disadvantages. However, by joining a small list of states without one of these taxes, West Virginia will be a very attractive place for companies and individuals deciding on what state to call home.
Second, phase-in tax reductions over time as the state meets certain revenue thresholds. By telling the world that our goal is to eliminate a certain tax over a few years, private investment decisions will be made with the final tax rates in mind. Furthermore, by watching the state's revenues carefully before a tax reduction is made, West Virginia can avoid the sort of fiscally irresponsible behaviors of some states, such as Kansas.
Third, aggressively eliminate wasteful spending. If the state can provide a legitimate function of government for less money than they are spending now, it is their duty and obligation to do so. If a government program is no longer needed, it must be completely eliminated so that other functions can be more fully funded.
Any move to reduce or eliminate taxes in West Virginia is likely to have a positive effect on the decisions companies and individuals will make when evaluating West Virginia as a potential landing spot.
Sound tax policy is one area in which West Virginia can ensure economic growth, prosperity, and a good quality of life for our citizens.
Keith Pauley is chairman of the Cardinal Institute for West Virginia Policy.