By JIM WORKMAN
West Virginia Press Association
CHARLESTON, W.Va. — Industrial personal property tax is destructive to the economic health of the state of West Virginia, state officials said Wednesday, adding that a recent West Virginia Forward report by West Virginia University and Marshall University with the Department of Commerce calls the tax the “greatest impediment” to economic growth.
There is an attempt to remedy that problem – but it takes an amendment to the state’s constitution and voter approval to pull it off.
The “Just Cut Taxes and Win Amendment” to Article X of the West Virginia Constitution was discussed Wednesday in the House Finance Committee.
Revenue Secretary Dave Hardy made a presentation and, along with and Commerce Secretary Woody Thrasher, fielded questions from delegates.
Hardy reminded the committee that Gov. Jim Justice has a desire to grow the economy by amending the state constitution to eliminate a hurdle to economic growth, with no new taxes.
Much work remains. Both the Senate and House would have to approve the amendment by a two-thirds margin. The amendment would then go to the state’s voters in either a special or general election. The goal is to get it on the November 2018 ballot.
West Virginia is one of only seven states that taxes its industrial business inventory. It puts the Mountain State at a competitive disadvantage when attempting to attract new manufacturing, Kris Hopkins, Executive Director of the West Virginia Development Office, told the committee.
Professional site consultants regularly point to the inventory taxes as a deterrent to choosing West Virginia, Hopkins said.
“For 12 years, I’ve sat across the table from corporations, trying to bring them to the state of West Virginia,” he said. “Whether it’s a two-person fabrication shop or a $5 billion chemical operation, this is an issue. We’ve seen it time and time again.
“West Virginia desperately needs growth,” Hopkins added. “Growth solves a lot of our problems.”
Replacing $140 million of revenue that the property taxes bring in without adding new taxes is a challenge, because counties, municipalities and public education depend on the money.
The amendment proposes to constitutionally guarantee the $140 million in $20 million increments, phased in over fiscal years 2021-2027. The $140 million is also guaranteed in perpetuity thereafter, replaced by general revenue. That funding is based on what was described as a conservative general revenue growth of 3 percent, calculated over a 30-year average.
Those guarantees have eased concerns of county commissioners and other local officials, proponents report. But the guarantees drew concern from several members of the finance committee, including Delegate Brent Boggs, D-Braxton.
“I’ve been here a long time, and we’ve seen good (economic) times and we’ve seen bad times,” Boggs said. “We aren’t always able to predict those. There are other pressures on the budget, in addition to what this would create, should we experience a downturn. Then, who would be the losers if we need to cut? That’s the only thing causing me concern at this point.”
If indeed the tax is a serious impediment, as experts says it is, the potential, substantial growth would offset that, Hardy answered.
“That’s the upside,” Hardy added. “It’s a substantial opportunity.”
Following the meeting Rebecca R. McPhail, president of the West Virginia Manufacturers Association, expressed the organization’s position to the West Virginia Press Association:
“The WVMA and its members have long sought relief from the competitive disadvantage created by the industrial inventory, equipment, and machinery tax. We have also advocated for a fiscally responsible solution for phasing out the tax and making stakeholders whole. We are pleased to see that Just Cut Taxes and Win does just that while opening up West Virginia for manufacturing investment and job growth.”
“The JCTAW proposal creates a level of cost certainty for those considering manufacturing investments while affording counties and schools a stable source of revenue, and does so without shifting the tax burden,” said McPhail. “In West Virginia, employment indirectly supported by manufacturing jobs represents 22.2 percent of total state employment. Combined with the 6.5percent provided by direct manufacturing jobs, our industry represents nearly 30 percent of the state’s employment. We are all aware of the need for economic diversity in our state.”
“Manufacturing can be the heart of that economic diversity if we continue to create a competitive environment for growth,” she added.
During the meeting, Thrasher told the Delegates, “It’s important to see the big picture and where we are trying to get to. The majority of the big swings are a direct result of our dependence on the resource recovery business – coal, oil and gas. The solution to that is to diversify our economy. With this tool, it allows us to diversify, by really being competitive, to non-resource recovery industries.
“The real goal is to make us competitive and to bring in more industry,” Thrasher continued. “It would soften the ups and downs with a long term solution. We have to go to the core problem and make this happen.
“This is the issue that is really holding (West Virginia) back,” Thrasher said. “We need to make these fundamental changes. This (amendment) is a reasonable approach.”
Solving pressing state issues such as teacher salaries and PEIA depends on growing the state’s economy, Thrasher said.