Opinion

The Gazette-Mail Editorial: State can’t tax its way to prosperity

Thursday, Oct. 8, 2015 editorial from Daily Mail page:

West Virginia ought to know better than any state that it can’t tax its way to prosperity. It wasn’t that long ago when the state’s tax burden on businesses was among the highest of the 50 states.

That — combined with minimal room for companies to expand, issues related to workforce and education, and access to cheaper raw materials elsewhere — caused many companies to move their operations to less-costly climes out of state. Tax policies have improved to the point the Tax Foundation now ranks West Virginia as 21st in the business tax climate index.

But the state’s economy, with a 7.6 percent unemployment rate and the nation’s highest percentage of non-working adults, is still struggling.

Some are now calling for an increase on natural gas severance tax. Particularly when political leaders need to be doing everything possible to attract new business and investment, that’s not a good idea.

A plan proposed last month by the West Virginia Center on Budget and Policy calls for the state to raise the severance tax on natural gas liquids from 5 percent to 10 or 15 percent, with a credit for liquids that are processed in state.

Natural gas produced in the Marcellus shale in northern West Virginia tends to be “wet gas,” containing high volumes of liquids that are used as feedstock for chemical production.It’s this large quantity of liquids, particularly ethane, that has been driving the discussion of attracting an industrial cracker and related plants to the region to take advantage of the abundant raw material. Currently the liquids are shipped to locations, such as the Gulf Coast, where cracker plants exist.

While some are getting behind the tax increase idea, the Center for Economic Research at Marshall University has already studied how to optimize the natural gas boom, and more taxes on production are not among its recommendations.

“West Virginia can focus on modifying practices and policies that improve the cost of doing business in the State,” the Center wrote in a Value Added Opportunities report published in 2013. “All firms in general look for a labor force that excels in math, science and engineering, access to transportation infrastructure that will meet the needs of the establishment for its expected life and access to well-located sites for development.”

There’s a lot West Virginia can do, and is doing, to improve the chance of a cracker being developed in-state. Instituting higher taxes is not likely to be a drawing force.

See more editorials at: http://www.wvgazettemail.com/article/20151008/DM04/151009581/1279#sthash.ZQ1gTqKs.dpuf

 

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