West Virginia is one of only seven states that tax tangible business personal property such as equipment and inventory. However, that could ultimately change if some legislative leaders get their way.
State Senate President Mitch Carmichael says a bill will be introduced in the regular legislative session to phase out the tax over a seven-year period.
The West Virginia Chamber of Commerce has long been a supporter of eliminating business personal property taxes. There's no personal property tax on machinery and equipment in Pennsylvania or Ohio and officials believe phasing out the tax would put West Virginia in a better place to compete for jobs.
As the Chamber’s website states: “For manufacturers looking to expand or relocate, this unique tax is a major consideration. Our Legislature must consider tax reform that would reduce or eliminate this onerous tax.”
Business personal property taxes bring in approximately $140 million annually in West Virginia. Phasing out the tax would require voters to approve an amendment to the state constitution.
“We’re going to put into the constitutional amendment, a guarantee that schools and counties will still receive the same amount of tax revenue,” Senator Carmichael told MetroNews Talkline.
“For the first year of the phase out, $20 million would come from money set aside for unfilled employee positions in state government,” Carmichael said. “After that, new money would come from the state’s general fund based on increased tax revenue and spending cuts.”
While eliminating personal property taxes might be a popular political move, the real issue is whether lawmakers can find ways to replace the lost tax revenues. These taxes now go to counties, primarily for school systems. Counties would be hard-pressed to come up with equal funding on their own.
Some lawmakers believe that efficiencies can be found elsewhere in government to make up that money. However, finding money to balance the state budget has been a tough task that led to special legislative sessions in the last two years.
West Virginia faces many issues that will require additional funding that could cost well more than the proposed reduction in personal property tax revenues. These factors must be carefully weighed. As Congressman Mick Bates, a member of the house finance Committee explained, "Adding additional volatility doesn't seem appropriate at this time."