West Virginia’s personal property tax on machinery, equipment and inventory has long been a sore spot with the business community. For decades, various business groups have lobbied against the tax and produced studies showing how the tax inhibits economic growth.
Governor Cecil Underwood’s Commission on Fair Taxation report way back in 1999 was blunt in its assessment:
“Businesses in West Virginia are at a competitive disadvantage economically,” the report concluded. “The tax is complicated, difficult to enforce, inequitable and discriminatory in that only certain entities are monitored for compliance.”
However, the tax generates revenue for schools and local governments, and the collection of the tax is required by Article X of the state Constitution. That section provides a constitutional guarantee for a revenue stream to those entities.
Now the issue is coming to a head. Voters will decide on Amendment Two in the November 8 election. A “yes” vote would authorize the legislature to exempt the property tax on machinery, equipment and inventory, as well as the property tax on vehicles. A “no” vote would leave things the way they are.
Governor Jim Justice is campaigning against the amendment, arguing that removing the tax would provide the most benefit to “big, big companies, big corporations and many of them are out-of-state corporations.”
Further, Justice contends that in his business recruitments, “I haven’t had anybody push back on me and say, ‘you know we’d really like you to get rid of that machinery and inventory tax.’ Nobody. Nobody.”
The Governor’s position mystifies one of the groups that strongly supports Amendment Two, the West Virginia Manufacturers Association, and President Rebecca McPhail.
“We’re disappointed that the Governor is taking this position, and maybe a little surprised… maybe more than a little surprised given that this is a departure from the priority he has made in past state of the state addresses,” McPhail said on Talkline last week. “I’d love to better understand what has changed, and why suddenly this is not the right direction for West Virginia.”
The Manufacturers Association commissioned a study by the economic development consulting group Sanford Holshouser which bolstered their argument. “There is no question that in regard to certain manufacturing site selection projects the presence of (the tax) negatively impacts the potential for West Virginia to successfully recruit those projects.”
Justice may not have had specific conversations about the tax while recruiting businesses, but there is no doubt it is an issue. In fact, state and local government leaders often create work-arounds or payments in lieu of taxes while trying to attract a new business. Unfortunately, those same deals are typically not available to already established businesses.
Justice says he is looking out for the local governments, particularly the counties, that fear losing critical revenue. In addition, for the last several years, when it comes to tax cuts, Justice is far more interested in reducing the state income tax, which he argues will benefit the most West Virginians.
It is possible, even probable, that the average West Virginian who does not own or operate a business does not care much at all about a complicated section of the tax code that does not affect them. However, West Virginians are very aware of another provision of the amendment—the vehicle property tax.
I’ll talk more about that in a future commentary and during Talkline as Election Day draws closer.