This article examines the changing contours of West Virginia's state taxes, focusing on the period 1960-1991. It also compares West Virginia's current state taxes with those used by its neighboring states. A regional comparison of state taxes is appropriate because economic theory suggests that both individuals and businesses consider the level and type of taxes imposed by particular states and localities when they determine where to live or where to locate a business. In essence, economists argue that both individuals and businesses "shop" among states and localities and "buy" the one that offers a particular mix of taxes and services that they find most desirable (Tiebout 1956; Fisher 1988).

This "voting with their feet" theory of state and local government finance is often used to justify the awarding of taxbreaksto businesses. Sincetax revenue isderivedfrom economic activity, those who advocate this theory argue that states must keep business taxes to a minimum or run the risk of losing business investment to other states. Given the mass exodus of residents from West Virginia's borders during the past decade in search of a more favorable economic climate, an examination of West Virginia's state taxes' impact on business investment within the state is both appropriate and timely. However, it must be noted that there are limitations to the applicability of the "voting with their f eet" theory of state and local government f inance. The economic costs of physically moving from an existing residence or business location to a new state or locality often outweigh the economic benefits that other states and localities can provide through lower taxes. In addition, there are often many reasons for choosing to live in or to site a business in a particular state or locality other than its particular mix of taxes and services. For example, many people choose to live in a particular area to remain near

Patrick J. Chase is an Associate Professor in the Division of Natural and Social Sciences at Shepherd College. Robert Jay Dilger is an Associate Professor of Political Science and the Director of the Institute for Public Affairs at West Virginia University.

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relatives and many businesses choose to locate in a particular area because they want to be close to a specific market or natural resource. As a result, tax burdens and government service levels do have an impact on locational decisions, but that impact is a limited one and is likely to be significant only on a case-by-case basis. Moreover, although it is possible for an individual or business to move from West Virginia to Florida or to the west coast to avoid what they consider to be an unfavorable tax burden, given relocation expenses and market considerations, it is more likely that they would chooseto move to a neighboring state. Thus, it is important to examine West Virginia's state taxes in a regional context.

This article also assesses whether the changes in West Virginia's state taxes over the last thirty years have resulted in a state tax system that is more or less progressive. There are manywaysto evaluate a state'staxing system, including the adequacy of the revenue produced, the economy of its administration, the simplicity of its administration and understanding by taxpayers, its neutrality with regard to resource allocation, and its legitimacy as determined by the extent to which the public attempts to avoidtaxes. However, equity considerations concerning the incidence of the tax among income groups is universally considered to be one of the most important criteria in determining whether a tax system is a good one (White 1991).

HISTORICAL BACKGROUND

Prior to the 1900's, West Virginia's state government provided relatively few services and public expectations of state governmental activism was low. This was also true for most other states. The typical American voter and most elected officials throughout the United States at that time shared Thomas Jefferson's vision of what constituted good government: "government is best which governs least" (Conlan 1981).

Because government spending was restrained by cultural and political factors during the 1800s, West Virginia's state government relied on only five taxes to generate revenue: property, capitation, general license, insurance and charter. However, revenue from the capitation, general license, insurance, and charter taxes was nominal. As a result, during the 19th century, West Virginia's state government relied almost exclusively on the property tax for its revenue.

There has been some debate among economists concerning the extent to which property taxes are regressive (Aaron 1975; Fisher 1988; White 1991). However, most of them agree that property taxes are at least somewhat regressive because they are usually determined by applying a flat rate to the property's assessed value regardless of the property owner's income, landlords tend to pass the cost on to renters, and assessment practices tend to undervalue expensive properties owned bythe wealthy. As a result, West Virginia's statetaxes during the 1800s can be described as having been somewhat regressive.

Despite the enactment of four additional taxes during the early 1900s (see Table 1), WestVirginia's state government continued to rely on the property tax for the majority of its revenue until the Great Depression. At that time, the Tax Limitation Amendment of 1932 was adopted to provide property tax relief to home owners and to farmers. It divided all taxable property into four classes and assigned rate limits that could not be exceeded by local taxing authorities without approval by the voters. Statewide, the amendment resulted in a 46 percent drop in property tax revenue (from $50 million to $27 million) and produced a dramatic change in the fiscal relationship between the state and local governments, with the local governments becoming much more dependent on the state government for revenue (White 1991). It also altered the state government's revenue system. To make up for some of the revenue lost from the propertytax, the state enacted taxes on beer, liquorprofits, motor vehicles, racing and, most importantly, consumers sales and services. These changes shifted the state's CHRONOLOGY OF MAJOR STATE TAX LAWS IN
 WEST VIRGINIA

1863 PROPERTY TAX, CAPITATION TAX, GENERAL
 LICENSE TAX
1864 INSURANCE TAX
1865 CHARTER TAX

1904 ESTATE AND INHERITANCE TAX
1917 MOTOR VEHICLES AND OPERATORS'LICENSES
1921 BUSINESS AND OCCUPATION PRIVILEGE TAX
1923  GASOLINE EXCISE AND SPECIAL FUELS TAXES

1932 CONSTITUTION LIMITS PROPERTY TAX RATES
1933 CONSUMER'S SALES AND SERVICE TAX, RACING
 FEES, BEER TAX AND LICENSE
1935 LIQUOR PROFITS AND MOTOR VEHICLES
 PRIVILEGE TAX

1947 CIGARETTE TAX

1951 MUNICIPAL BUSINESS AND OCCUPATION TAX,
 SOFT DRINK TAX, USE TAX
1957 INSURANCE TAX
1959 PROPERTY TRANSFER TAX, MOTOR CARRIERTAX

1961 PERSONAL INCOME TAX, MANUFACTURED
 TOBACCO TAX, SALES TAX RAISED TO 3%
1967 CORPORATE NET INCOME TAX, TRANSPORTA-
 TION PRIVILEGE TAX

1970 BUSINESS FRANCHISE REGISTRATION TAX
1971 CAPITATION TAX REPEALED
1972 STATE LAW AMENDED TO ALLOW MUNICIPALI-
 TIES TO TAX BANKING INSTITUTIONS
1979 SALES TAX RATE ON GROCERIES REDUCED TO
 2%

1980 SALES TAX RATE ON GROCERIES REDUCED TO
 1%
1981 SALES TAX ON GROCERIES ELIMINATED AND
 SALES TAX RAISED TO 5%
1983 SURTAXES ON PERSONAL AND CORPORATE IN-
 COME TAXES IMPOSED
1987 B&O TAX EL1MINATED ON EVERYTHING EXCEPT
 PUBLIC UTILITIES AND ELECTRIC POWER PRO-
 DUCTION, CARRIER INCOME TAX ELIMINATED,
 CORPORATE INCOME TAX RATES RAISED FROM 7
 TO 9-3/4%, BUSINESS FRANCHISE TAX, TELECOM-
 MUNICATION TAXAND SEVERANCE TAX CREATED,
 RATES ON PERSONAL INCOME TAX REDUCED
1988 SALES TAX RAISED TO 6%
1989 SALES TAX ON GROCERIES REIMPOSED AND
 SEVERANCE TAX RATE RAISED

revenue system's emphasis away from the property tax and toward the sales tax and the business and occupation privilege tax (imposed on gross business income).

West Virginia's shift awayfrom a reliance on the property tax as the major source of state revenue during the 1930s was not a unique phenomenon. Twenty-f our states adopted a state sales tax between 1932 and 1938 (ACIR 1990a). They did this to diversify their revenue resources and to provide property tax relief to home owners and farmers whose income plummeted during the Great Depression and who faced the possibility of losing their homes and farms to the tax collector.

By 1960 West Virginia had increased the number of state taxes to nineteen, but it still relied on the sales tax and the business and occupation privilege tax forthe majority of its revenue (see Table 2). However, during the 1960s and 1970s Americans everywhere, as well as in West Virginia, began to change their expectations concerning government's appropriate role in providing services. Instead of viewing government as the actor of last resort, the public increasingly looked to government, particularly at the national and state levels, to provide solutions to a number of problems, including poverty, hunger, lack of adequate health care, water pollution, inadequate transportation systems and access to a quality education. The national government also encouraged the states to be responsive to these political demands for state government action by offering them intergovernmental grants with relatively low matching requirements. For example, the national government offered to pay for between 50 and 78 percent (depending on the state's per capita income) of the cost of providing income assistance and health care for the poor, 90 percent of the cost of constructing interstate highways and 75 percent of the cost to construct primary, secondary and urban highways (Dilger 1989).

As a result of these increased political pressures for more services and the desire to attract national government dollarsto theirstates, the level of state government spending increased dramatically throughout the United States during the 1960s and 1970s. In 1962, total state government expenditures amounted to $36 billion. Ten years later that amount had increased to $109 billion and in 1980 state governments spent $257 billion. In percentage terms, the typical state government increased its expenditures by 613 percent (34 percent annually) during this period (ACIR 1990a). West Virginia's state government was not an exception to this trend. It spent $330 million in 1962 (Davis et

al. 1963). In 1980 it spent $2.2 billion, an increase of 577 percent (32 percent annually) over the 18-year period (Gainer 1980).

As state government spending increased, state elected officials across the country were faced with a dilemma. Although the public wanted more governmental activism, theydid not want highertaxes. Since allbutoneof thestates (Vermont) required a balanced state operating budget, state government officials, including those in West Virginia, realized that, unlike the national government, they Gould not rely on borrowing to provide most of these services (though bonds have been used by many states to provide for capital outlays such as highway and school construction). Instead, they would have to rely on taxes and fees to pay for these services. However, since spending was increasing rapidly, theyfaced the undesirable prospect of having to vote on tax rate and fee increases every year. Not surprisingly, it was during this period that many state government officials began to argue that they should increase their state's reliance on the income tax as a revenue source. Income taxes, particularly progressive ones, are more elastic than either the sales or the property tax (income taxes tend to generate more revenue than other taxes during periods of economic growth). As a result, income taxes increasingly became viewed as a convenient mechanism for the states to provide the revenue necessary to meet the national government's intergovernmental grant-matching requirements, meet the public's increasing appetite for increased services, and, at the same time, relieve state elected officials from the necessity of voting for state tax rate increases.

West Virginia was not an exception to the national trend toward a greater reliance on the income tax as a source of revenue for state government. Itadopted apersonal income tax in 1961 and a corporate net income tax in 1967. As a result, by the end of the 1960s, West Virginia's state government's revenue system had begun to undergo an other majorshift in emphasis. As Table 2 indicates, the state government continued to generate approximately 30 percent of its revenue from the sales tax, but it reduced its reliance on the business and occupation privilege tax (down to 34 percent) while increasing its reliance on the income tax (14 percent). Since sales taxes are regressive, business and occupation privilege taxes tend to be passed on to consumers, and West Virginia's income tax was progressive, the attempt to obtain a more adequate state taxing system by creating a state income tax also made the state's tax system less regressive than it had been in previous years.

The 1970s and early 1980s proved to be difficult ones for many states across the country. The nation had enjoyed an economic expansion of historic proportions during the 1950s and 1960s. State government officials had become accustomed to continued economic expansion and the increased revenues that their newly diversified and more elastic revenue systems provided them. However, the inflationary impact of the Arab oil embargo of 1973, coupled with the Federal Reserve Board's subsequent actions to combat inflation with high interest rates, restrained economic activity throughout the country and especially in the industrialized Northeast and Midwest. The recession's impact on economic activity in West Virginia is evidenced bythe dip in sales tax revenue as a percentage of the state's total general revenue. In 1970, the 3 percent sales tax provided 29 percent of the state's general revenue, but it generated only 18.8 percent of the state's general revenue in 1975 and only 16 percent in 1980. Facing a budgetary crisis, the state increased the sales tax rate to 5 percent in 1982. However, recognizing that increasing the sales tax also made the state's taxing system more regressive, the special exemptions for food, adopted in 1979, and for prescription drugs, adopted in 1969, were retained.

As West Virginia's economy continued to stagnate throughout the 1970s and 1980s, primarily due to the same adverse economic conditions affecting all of the states as well as to technological innovations in coal extraction that reduced employment levels in that industry, the state began to increase its reliance on its income tax for its general revenue. As Table 2 indicates, the percentage of the state's general revenue generated by the state's income tax increased from 14 percent in 1970 to 28.7 percent in 1985. The state's increased reliance on the income tax for its revenue during the mid-1 980s caused the state's tax system to become significantly less regressive than at any other time in its history. However, this had come about almost as an afterthought. The primary goal of state policymakers continued to be the creation of a revenue system that was adequate, not progressive. This assertion is evidenced by the recent tax decisions made by West Virginia's policyrnakers.

During the latter half of the 1980s, most of the states in the Northeast and Midwest began to emerge from the recession. However, West Virginia's economy continued to stagnate and it became obvious to West Virginia's state policyrnakers that the state's revenue system could not count on increased economic activity to generate suff icient revenue to meet the public's demand for services. Believing that it was politically impossible (or ideologically inappropriate) to reduce state spending significantly, many of them believed that it was necessary to increase state tax rates to generate sufficient revenues to meet the immediate necessity of balancing the state budget. However, the decision to raise state tax rates was complicated by the tax decisions reached by other state governments. The economic downturn during the 1970s and early 1980s had elevated economic development strategies to the top of the priority list for state government officials throughout the nation. Many states had already reduced their business taxes in an effort to attract additional business investment during this period. This created a dilemma for many of West Virginia's state policyrnakers. They knew that they had to raise tax rates but they also feared that raising state taxes, particularly ones affecting businesses, might also constrain future economic growth and cause the state's budgetary difficulties to last in perpetuity.

West Virginia's policyrnakers solved their taxing dilemma in 1987 by making significant changes in the state's tax system. These changes, particularly the elimination of the business and occupation privilege tax on all businesses except public utilities and electric power production, were apparently derived from the belief that taxes play a vital role in business locational decisions. As Table 2 indicates, the tax changes adopted in 1987 shifted the state's tax burden away from business and toward individuals. Revenue from the three main taxes on businesses, the business and occupation privilege tax, the corporate income tax and the severance tax, dropped as a percentage of state government general revenue from 39.8 percent of the total in 1985 to 27.3 percent in 1990. To make upforthese lost revenues, the state increased the tax burden on individuals by increasing the sales tax rate to 6 percent, reimposing the sales tax on food and restructuring the state's personal income tax, reducing its top rate from 13 percent to 6.5 percent and eliminatingall itemized and standard deductions.

These actions resulted in a revenue system that had a greater capacity to generate sufficient revenues to meet the public's desire for state services. The shift away from business taxes also represented a bold new approach to solving the revenue shortfalls that have plagued the state since the early 1970s. However, these actions, particularly the reimposition of the sales tax on food and the reduction in the personal income tax rate for the wealthy, alsocaused the state's tax system to become more regressive. West Virginia's state taxes on individuals now rival Pennsylvania's and Tennessee's as the most regressive in the region.

Kentucky, Pennsylvania and West Virginia have the highest state sales tax rates in the region. When local sales taxes are included, Tennessee emerges as the state with the highest combined state-local sales tax rate (generally ranging between 6% and 7.75% in each of its counties), followed by Kentucky, Pennsylvania and West Virginia.

Kentucky, Tennessee and West Virginia exempt from their sales tax only two of the four major categories of goods that most analysts argue ought to be exempted from the sales tax to make it less regressive. Pennsylvania exempts goods in three of these four categories from its sales tax.

West Virginia's personal income tax is no longer the most progressive in the region. Instead, the 1987 tax changes reduced the progressivity of West Virginia's personal income tax to about the average for the region, with Ohio having the most progressive personal income taxes and Pennsylvania having the least progressive personal income taxes.

TAX BURDENS FROM A BUSINESS
PERSPECTIVE: REGIONAL COMPARISONS

West Virginia's recent taxing decisions were apparently based on the belief that state taxes play an important role in business locational decisions. As mentioned previously, state taxes probably play a marginal role in these decisions, but they may play an important role on a case-by-case basis, particularly if tax burdens are significantly different in surrounding states.

Table 5 provides a regional comparison of total state tax burdens based on both per capita and personal income in FY 1988. West Virginia's state taxes on a per capita basis were below the national average in FY 1988 and were the third lowest (to Tennessee and Ohio) in the region. In contrast, West Virginia's state taxes as a percentage of personal income were the highest in the region and were much higher than the national average (tenth overall).

Businesses interested in investing in the region are likely to consider West Virginia's total state tax burden as being favorable to business investment. Not only are state taxes on a per capita basis relatively low in West Virginia, but thosetaxes are unlikelyto go much higher because they are already very high relative to personal income.

The conclusion that the total state tax burden is relatively low in West Virginia is buttressed by data generated by the U.S. Advisory Commission on Intergovernmental Relations (ACIR). Each year since 1962, ACIR has examined each of the states' tax systems and has constructed a single "average" state tax system that is representative of them all. It then estimates the amount of revenue that each state government would have derived if it had substituted ACIR's Representative Tax System (RTS) for its own. The resulting revenue f igure is often ref erred to as the state's tax capacity. A state's fiscal effort is then defined as the ratio of its actual revenues to its estimated capacity.

This, in turn, provides a convenient way to measure the extent to which a state taxes its available resources relative to the national average.  West Virginia had used the Representative Tax System in 1988, it would have raised $1,383 per person as opposed to the national average of $1,772 for all of the states. This indicates that West Virginia's tax capacity in 1988 was only 78 percent of the national average. West Virginia had the lowest tax capacity in the region and was 46th out of the 50 states and the District of Columbia. Although it can be argued that West Virginia's assessment practices, relative to the assessment practices in other states, undervalues the tax potential of West Virginia's mineral resources (White 1991), Table 6 indicates that West Virginia's official, reported taxable resources are significantly lowerthan the typical state and are the lowest in the region.

West Virginia's state tax system actually generated $1,211 per person in 1988, or 88 percent of the revenue it would have generated if it had used ACIR's FITS model ($1,211 divided by $1,383). This placed West Virginia 43rd in the nation in state tax effort and second lowest in the region (to Tennessee).

Businesses are likely to view ACIR's data as indicating that West Virginia's total state tax burden is favorable to business investment because that burden is low, both in relation to the typical state in the nation and to other states in the region. However, although state taxes are already very high in relation to personal income, ACIR's tax effort data also suggests that West Virginiacould increase its total state's tax burden and still remain below both the national and the regional averages,

severance taxes are higher than those used by most of the states in the region and that its corporate gross receipts tax (business and occupation privilege tax) is lower than the regional average.

Corporate Income Taxes

Table 7 indicates that if West Virginia had applied the states'average corporate income and net worth tax in 1988 it would have raised $83.15 for every person in the state. Reflecting the relatively dismal economic conditions in the state at that time, this was the lowest amount in the region and 40th in the nation.

Despite the tax changes in 1987 that shifted West Virginia's state tax burden away from businesses, West Virginia's revenue from its corporate income tax in 1988 was $94.98 perperson or 114 percent of what it would have generated if it had applied ACIR's FITS model. From a business perspective, West Virginia's corporate income taxes are a disincentive to invest in the state.

Specific Business Taxes

Although businesses are interested in a state's total tax burden, they are particularly interested in how each state taxes businesses. Tables 7-10 provide a regional comparison of four major state business taxes: corporate income, gross receipts, licenses and severance. They indicate that West Virginia's corporate income taxes, license taxes and West Virginia has the third highest corporate income tax burden in the region (behind North Carolina and Pennsylvania) and the tenth highest in the nation. Although West Virginia's corporate income tax rates are scheduled to be reduced from 9.675% to 9% in 1993, West Virginia's relative corporate income tax burden will likely remain above the region's average.

Corporate Gross Receipts Taxes

West Virginia had applied the states' average gross receipts tax on businesses it would have generated $70.89 per person in FY 1988. It actually generated only $28.69, or 40 percent of what it would have generated using the ACIR's FITS model. This was the next to the lowest level in the region (only Pennsylvania was lower) and 30th in the nation. From the business perspective, West Virginia's relatively low gross receipts tax helps to offset its relatively high corporate income tax.

License Taxes

West Virginia had applied the states'average license taxes on corporations it would have generated $2.11 per person in 1988. Reflecting the relativelydepressed statusof economic activity in West Virginia at that time, its tax capacity from license taxes on corporations was the lowest in the nation.

West Virginia's state taxing system actually generated only 88 cents per person from license taxes on corporations, or 42 percent of the amount it would have raised if it had employed ACIR's RTS model. Although the 42 percent figure would seem to indicate that West Virginia had relatively low license fees in 1988, two states had such high license taxes (Delaware and Ohio) that West Virginia's 42 percent of the average was the sixteenth highest in the nation and the third highest in the region.

Severance Taxes

Table 10 indicates that if West Virginia had applied the states' average severance taxes in 1988 it would have raised $80.21 per person, the sixth highest in the nation. West Virginia's tax capacity from severance taxes is the highest in the region, more than two times greater than Kentucky's, which is ranked second in the region, and more than ten times greaterthan that of other states in the region.

West Virginia actually raised $78.91 per person from severance taxes in 1988, or 98 percent of the amount that would have been generated if West Virginia had employed ACIR's RTS model. This was the fourteenth highest rate in the nation and second highest in the region (to Kentucky).

The data from Tables 7, 8, 9 and 10 indicate that West Virginia subjects its business community to relatively high corporate income taxes, license taxes, and severance taxes but has a relatively low business and occupation privilege tax (gross receipts tax).

compare with those imposed by other states. It indicates that West Virginia's businesstaxes were belowthe national average in 1988. West Virginia's state business taxes raised 86 percent of the revenue that they would have raised if their rates were at the national averages in the ACIR's RTS model. This suggests that from a national perspective, West Virginia provides business with a relatively favorable taxing environment. However, as mentioned previously, taxes play a marginal role in business locational decisions and are more likely to play a significant role only after a business has already decided for other reasons to locate in a particular region and is deciding in which state in that regionto locate. As a result, it is more importantto know how West Virginia's business taxes compare with those of other states in the region than with the national average

West Virginia's state business taxes are below the national average, those taxes are about average for the region. Three states (Tennessee, North Carolina and Kentucky) impose a higher tax burden on businesses than West Virginia while four states (Virginia, Maryland, Pennsylvania and Ohio) impose a lightertax burden on them'. This suggests that despite the tax changes that were adopted in 1987, West Virginia still does not present the business community with a significantly more attractive taxing environment than other states in the region.

CONCLUSIONS

State elected officials throughout the country continue to seek innovative ways to raise additional revenues to meet the public's desire for services while avoiding the political difficulties that arise from raising tax rates and reducing services. During the 1960s, state elected officials became convinced that they could escape their dilemma by shifting their state revenue system's emphasis away from the less elastic property taxes and sales taxes toward the more elastic individual and corporate income taxes. They assumed that economic growth would produce more than sufficient revenues to meet state needs. Moreover, since income taxes are generally more progressive than sales and property taxes, the shift toward income taxes not only produced state revenue systems that had an increased capacity to provide adequate revenues but it also resulted in more progressive revenue systems.

Although the states' decisions to shift their revenue systems' emphasis toward income taxes have made state revenue systems more elastic, economic growth has generallyfailed to provide states with sufficient revenue to meet the public's demand for state government services. The revenue shortfall is primarily due to the relatively low rates of economic growth in recent years, particularly in the Northeast and Midwest. However, the shortfall is also due to national government mandates that have caused the states to increase their service responsibilities in several policy areas, particularly education and the environment. In addition, state funding from the national government's intergovernmental grants programs has generally not kept pacewith inflation. Moreover,the costof meetingthe states' share of the Medicaid program's health care expenses alone is straining many state budgets to the limit. As a result, despite the political repercussions, state tax rate increases have become almost commonplace throughout the nationduringthe latterhalf of the 1980s and early 1990s.

Even ifthe national economy improves dramatically during the 1990s, state elected officials in all of the states as well as in West Virginia will still have to undergo the politically painful process of raising existing tax rates and prioritizing expenditures. There will also be the temptation to turn to bonds as an alternative means to f inance projects that in the past would have been paid for out of the operating budget. In addition, despite the objections of public employee unions, many states are likely to consider various forms of privatization of state government services, particularly the contracting out of service delivery, as a means to reduce state government expenditures without sacrificing service levels (Savas 1987; Henig 1990; Katz 1991; Landsberg 1991).

As the adequacy of state revenue systems becomes paramount, the progressivity issue is likely to become lost unless state policymakers make a conscious decision to reach a consensus on how progressive or regressive they want their revenue system to be. If the progressivity issue is not debated openly and in a meaningful way, it is highly probable that most state revenue systems across the country, including West Virginia's, will become more regressive during the 1990s. This is likely to occur for three reasons.

First, although there is no conclusive evidence to support the contention that reducing state business taxes has a significant impact on business locational decisions, most state elected officials throughout the nation continue to base their business taxing decisions on that premise. In most instances, other economic factors typically play a much greater role than taxes when businesses determine where they will locate or expand. Depending on the type of business, the decision can be influenced by plant or site availability, access to and cost of transportation, the quality and cost of labor, proximity to markets and supplies, the state's regulatory environment, the quality of the state's schools, colleges and universities, the cost of housing, the level and quality of public services, and a wide range of other amenities that enter into the subjective determination of an area's quality of life (Pomp 1991). For example, California has the twelfth highest state business taxes in the country yet still enjoys economic growth rates that far exceed the national average. However, many states, like West Virginia, that are at a comparative disadvantage with otherstates in attracting business investment becausethey lack large population centers, ports and other natural conduitsto economic growth have decided to exercise restraint when imposing taxes on business. This trend is likely to continue, As a result, it is very unlikely that many states will significantly increase business taxes in the near future. Instead, they are likely to focus their attention on the personal income tax and the sales tax as their primary means of generating additional state revenue.

Second, states have traditionally viewed the income tax as the national government's tax, the property tax as the local government's tax and the sales tax as"their" tax. As a result, there is a natural tendency for state policyrnakers to increase sales taxes, despite their regressive nature, when the state's revenues prove to be inadequate.

Finally, public opinion polls have consistently indicated that the public views the personal income tax, despite its relatively progressive nature, as the most unpopular tax of all. As a result, state elected officials are reluctant to increase state income tax rates because many of them are convinced that raising income taxes is more politically damaging than raising other types of taxes or fees. As a result, they are more likelyto increase state salestaxesthan they are state personal income taxes. Moreover, as Table 4 suggests, many states, including West Virginia, have revised their personal income taxes in recent years, making them less progressive thanthey once were. These changes were undertaken for the same reason that states have become reluctant to increase taxes on businesses. Many state policyrnakers are convinced that individuals who are relatively well-off consider the state's tax burden when they decide where to live. They lowered their state's top marginal income tax rates to encourage the relatively well-off to remain in their state and to attract others in similar economic circumstance to locate in their state. Asa result, when states look to their personal income taxes for additional revenues they are more likely to raise those revenues by increasing the rates of taxation than they are to after the tax brackets to make them more progressive.

REFERENCES

Aaron, Henry J. 1975. Who Pays the Property Tax? Washington, DC: The Brookings Institution.

Advisory Commission on Intergovernmental Relations. 1990a. Significant Features of FiscalFederalism. Vols. 1 and 2. Washington, DC: ACIR.

.1 990b. State Fiscal Capacity and Effort, 1988. Washington, DC: ACIR.

Bowman, John H. 1984. Property Tax Equity and Efficiency. Charleston, WV: West Virginia Tax Study Commission.

Cline, Robert J. 1984. Equity of the Personal Income Tax. Charleston, WV: West Virginia Tax Study Commission.

Conlan, Timothy. 1981 - Government Unlocked: Political Constraints On Federal Growth Since the 1930s. In The Condition of Contemporary Federalism: Conflicting Theories and Collapsing Constraints. Ed. David B. Walker. Washington, DC: U.S. Advisory Commission on Intergovernmental Relations.

Davis, Claude J., Eugene R. Elkins, Carl M. Frasure, Mavis Mann Reeves, William R. Ross and Albert L. Strum. 1963. West Virginia State and Local Government Morgantown, WV: Bureau for Government Research, West Virginia University.

Dilger, Robert J. 1989. National Intergovernmental Programs. Englewood Cliffs, NJ: Prentice-Hall.

Fisher, Ronald C. 1984. Tax Exemptions. Charleston, WV: West Virginia Tax Study Commission.

Fisher, Ronald C. 1988. State and Local Public Finance.

Third ed. Glenview, IL: Scott, Foresman and Company.

Gainer, Glen B., Jr. 1980. Analysis of Receipts and Expenditures. Charleston, WV: State Auditor's Off ice.

Goodman, Robert P. 1984. Continuation of the Soft Drink Tax. Charleston, WV: West Virginia Tax Study Commission.

Henig ' Jeffrey R. 1990. Privatization in the United States: Theory and Practice. Political Science Quarterly 104:4: 649-670.

Hill, Gordon C. 1984. Simplification and Enhancement of State Tax Administration. Charleston, WV: West Virginia Tax Study Commission.

Hoyer, R.W. and Antonio Jones. 1975. The Municipal Business and Occupation Tax in West Virginia. Morgantown, WV: Bureau for Government Research, West Virginia University.

Institute on Taxation and Economic Policy. 1991. A Far Cry From Fair. Washington, DC: Citizens for Tax Justice.