Business Inventory Tax Story Archives - West Virginia Public Broadcasting

Senate Leaders Call On Justice To Include Them In Amendment 2 Public Forums

Senate President Craig Blair, R-Berkeley, and Finance Committee Chair Sen. Eric Tarr, R-Putnam, say they need to participate in Gov. Jim Justice’s “community conversation” public forums on Amendment 2.

The proposed constitutional amendment would give the legislature authority to regulate property taxes. It is one of four amendments on the Nov. 8 ballot.

“There’s misinformation that’s been passed on in those forums that is just inaccurate,” Blair said. “If we did the forum together, they can make their argument against Amendment 2, we can make our argument for the amendment and let the public know what the real answers are.”

Blair said the amendment doesn’t do away with any taxes and Justice’s claim that business and inventory taxes only benefit corporations is false.

“Seventy percent of state business is made up of small West Virginia businesses and they pay taxes on their equipment and inventory, machinery and their vehicles, regardless of their annual sales or the profits,” Blair said. “Another Justice argument completely disregards the fact that there’s a pile of agreements out there that make it so that the large corporations are already exempt from business and inventory taxes.”

Blair said the Senate Finance Committee’s property tax regulation plan, which is still subject to revision, details how West Virginia county governments, schools and services will actually get more funding, not less. He said this proposal is far from a state power grab.

“We’re doing it transparently so that they can see what we’re talking about up front. But it still has to go through the legislative process and everything can be adjusted,” Blair said. “We’re partners, we’re partners with the counties, we’re partners with the local school boards, we’re partners with municipalities. They have been on the decline for a long time — but our state government, we’ve got that right sized and it’s working well.”

In response to the call for public debate, Justice said that when Blair and Tarr were presenting their plan around the state, he wasn’t invited.

“I’m not looking for a food fight,” Justice said. “I’m not looking for a debate. I’m looking for the fact that I have not presented the other side. All I need to do is peacefully present my side and then let the people decide. And whatever they decide I’ll be all in.”

Two Sides To A Proposal That Would Eliminate W.Va.’s Business Property Taxes

If West Virginia voters say yes to "Amendment 2" on the November ballot, the state legislature will have the authority to eliminate business equipment and inventory taxes and the property tax on vehicles.

If West Virginia voters say yes to “Amendment 2” on the November ballot, the state legislature will have the authority to eliminate business equipment and inventory taxes and the property tax on vehicles.

Senate President Craig Blair, R-Berkeley, embraces the tax cut plan, but many county leaders fear the tax cuts would devastate basic public services.

Blair said one of many examples of the harm caused by West Virginia’s equipment and inventory tax began in 2016, when coal demand was low, mines shut down and moved equipment out of state or sold it. Blair said fast forward to the past two years — he figures the state lost between $75 million to $125 million, because coal demand and prices went up. But miners didn’t have the equipment to get it out of the ground.

“We’re missing out on the severance tax, we’re missing out on the personal income tax, because of the supply chain issues,” Blair said. “The people that sold their equipment, machinery — they can’t get it back fast enough to be able to be part of this wave, and we’re totally missing out on that.”

Blair said to consider the tax plight of long time Cabell County manufacturer Blenko Glass, and the hundreds of molds they use intermittently — but pay tax on every year. He mentioned the possibility of Amazon and other “store and ship” facilities setting up warehouses in West Virginia border counties with no inventory tax.

“I will quote to you from the West Virginia Center on Budget and Policy, which tends to lean a little to the left, I believe,” Jim Morgan said. “One of their facts is that during the past decade states with property taxes on business, machinery, equipment and inventory saw more manufacturing jobs growth on average, than the states without such taxes.”

That statement comes from former state delegate and current Cabell County Commission president Jim Morgan. Morgan said West Virginia counties get up to 40 percent of their operating budget, for fire, law enforcement, schools, solid waste — money from the taxes Blair wants eliminated.

“In Cabell County, we would lose $11 million in total school losses that won’t be made up by the school aid formula,” Morgan said. “That money would just be gone at that point. The legislature has said, that’s okay, we will backfill that and make you whole. Huh? As if we trust the legislature?”

Blair said a continuation of flat line budgets netting state revenue surpluses gained over the past several years will more than make up for the nearly $600 million in tax receipts now covering county bills.

“It’s not a big demand on the government. In fact, it makes it so that our agencies can get rid of the ‘spend it or lose it’ mentality,” Blair said. “That even includes getting rid of the regional jail fees for these counties. There are a multitude of examples out there when somebody is crying wolf, that we’re going to put the counties out of business, or we’re going to hurt the counties. It’s nonsense. What we’re trying to do is give him a hand up instead of being stagnant or declining, like most of them have been.”

Morgan countered that revenue surpluses are never guaranteed, and flat line budgets predicated on less spending have proved disastrous for state maintenance, growth and prosperity.

We have teaching vacancies, we have correction officer vacancies,” Morgan said. “Despite construction being done in high volume areas on major highways, roads are in poor shape. We’ve cut higher education. We’ve cut all kinds of things and he says we have a flat budget. Yet, West Virginia is falling apart.”

When Blair became senate president, he said he wanted 400,000 people to come to West Virginia. He said that can happen with eliminating those business property taxes. He said that will help create the industries and jobs that will keep graduates at home and bring young professionals in.

“And guess what? They’re the baby makers,” Blair said. “They’re the ones that fall in love, and have jobs here and stay here and make babies and send their kids to our school systems. And voting ‘yes’ on these constitutional amendments will actually make it so that we can accelerate the work that we’re doing and put more money into the people’s pockets.”

Morgan argues the legislative tax replacement plan is part of a state power grab.

“One scenario that we like to point out, if we were short $25 million in Cabell County, the legislature could very well say if you need more money, just raise everybody’s property tax in your county. The county commissions would be the bad guys for raising taxes to provide services — volunteer fire departments, EMS, 911 — all those things that the county funds. I believe it’s a mistake.”

The decision will be made on Nov. 8, with voters saying yes or no to “Amendment 2.”

Preview: W.Va. Property Tax Amendment On November Ballot

A proposed constitutional amendment on the ballot this November will give the West Virginia Legislature authority to remove or reduce a variety of county level property taxes.

West Virginia Public Broadcasting previewed the ballot measure, looking at concerns on how passage would affect the state economy, essential services and its taxpayers.

The proposed amendment provides the legislature with the authority to exempt tangible machinery, equipment and inventory used in business activity – and personal property taxes on motor vehicles from property taxation.

Del. Wayne Clark, R-Jefferson, was a sponsor of House Joint Resolution 3 that put the amendment proposal on the ballot. He said voters need to understand a yes vote does not make any property tax changes, but gives the legislature authority it did not have to consider and propose changes.

“What we do after that, that’s going to be Senate and House Finance Committee Chairman (Eric) Tarr and (Eric) Householder’s process of where we want to look, at what taxes to maybe move or reduce,” Clark said. “I think the county commissioners think, ‘Oh, well, we’re just going in there to take away your money,’ and that’s not true. They don’t understand that the amendment has to be passed, so that the legislature can look at making changes to the tax code.”

Sean O’Leary is the senior policy analyst with the West Virginia Center on Budget and Policy. He said these property tax cuts are something the legislative Republican leadership and caucus has been attempting for years.

“The plan the previous year was they were just going to go ahead and exempt it,” O’Leary said. “But when they couldn’t come up with a way to pay for it, the amendment was tweaked a little bit to say, well, we’ll be allowed to do it. And we’ll figure out something later.”

Both sides agree eliminating the business equipment and inventory tax and the motor vehicle tax could cost schools, local and county governments more than $500 million in lost revenue. Clark said the plan on how to replace those funds will be part of the legislative process.

“I’ve heard several different ideas. And that’s all they are – ideas,” Clark said. “What if we had to raise the food tax? Or what if we had a meal tax? Or what if we increased the hotel-motel tax or something, there’s all kinds of things. People are going to have to really trust in the abilities of Chairman Tarr and Householder and their understanding of what the budget is and trust that they’re going to come up with the best solution. How we’re going to make counties whole, I don’t know. But right now, the main goal is – let’s get this thing passed so we can at least start looking.”

O’Leary said the lost revenue would devastate local and county services and significantly shift decision making power from local to state government.

“These cuts account for 27 percent of total property taxes and that’s the bulk of funding for local governments that really rely heavily on property taxes,” O’Leary said. “In some counties, it’s even greater, up to more than 30 or 40 percent of their total revenue. A lot of this money goes to those excess levies that directly fund libraries, EMS services, fire protection, senior centers. That money is earmarked and if that base is taken away they have to redo all of those excess levees, all of those bond levees to make sure that the revenue is still there.”

Clark said maintaining a machinery and inventory tax puts West Virginia at a competitive disadvantage in recruiting and retaining businesses

“You take a company like Toyota or any auto manufacturer – once that car is made, it’s taxable, it’s inventory. You have an $80,000 car sitting on a lot,” Clark said. “The Green Power bus folks, I have no idea what an electric bus is going to cost to make. Let’s say they make 20 of them and they’re $100,000 each. Well, they’re paying taxes on something that’s not even sold, it’s just sitting there. So yes, it’s going to attract new businesses here. It is a deterrent right now for businesses to move into the area.”

”

O’Leary said neighboring Ohio got rid of its manufacturing personal property tax and it did nothing for manufacturing growth in that state. He said West Virginia property taxes are some of the lowest in the country, and the answer is to not make any cuts and use our tax revenues wisely.

“The solution is to take that tax revenue and invest it in ways that make West Virginia attractive and this is exactly what it does,” O’Leary said. “This money goes to schools, this money goes to public safety, this money goes to local infrastructure. We all want those things. Those things attract businesses. So why would we take that away? Why would we take away the resources that are funding the things that make West Virginia attractive?”

Voters will say yes or no to the officially titled “West Virginia Authorize Tax Exemptions for Vehicles and Personal Property Used for Business Amendment” on the election day, November 8, 2022.

Constitutional Amendments Widely Discussed Early in Legislative Session

House and Senate lawmakers introduced 28 joint resolutions in just the first week of the legislative session each calling for amendments to the state constitution. Some around the Capitol say such a number feels like a lot, while others say it’s rather normal. What is agreed upon, though, is that it is rare to have so many proposed constitutional amendments gaining traction this early in the session.

Long before the Legislature convened for the 2018 Regular Session, discussions surrounding a constitutional amendment that could repeal the state’s business inventory tax had already begun among House and Senate leaders, as well as Governor Jim Justice’s office. That tax — which has brought in, on average, about $140 million in revenue annually over the past 10 years — provides money that helps fund counties, particularly public education.

Republicans argue the tax makes it harder to attract businesses to the state and cite studies done by previous administrations that have called for its repeal. Some Democrats have questioned the measures as far as the long-term fiscal shape of the state, but are open to the idea — as long as county funding remains intact.

“I think there will be several people who will support that as long as the counties are made whole and don’t lose money as a result of that. And, you know, that money goes to education,” said Senate Minority Whip Corey Palumbo. “We don’t want to defund public education. The question is whether there’s going to be enough money to to make sure the counties are still okay.”

Following reports last year of the West Virginia Supreme Court of Appeals’ lavish spending on furniture and other office decorations, lawmakers are also considering various resolutions that could place the judicial branch’s budget under the Legislature’s review. This also would take a vote from the public to ratify an amendment to the state’s constitution.

“There’s been a lot of rumblings around that for years but nobody wanted step on the Supreme Court’s toes. But we’re the only state that doesn’t have some type of oversight of their budget — of the supreme court’s budget,” said Del. Michael Folk, who introduced one of many measures that would address the matter.

During budget hearings in front of the House and Senate Finance committees, Supreme Court Chief Justice Allen Loughry referred to the reports of high-dollar spending as “isolated” and promises, moving forward, he’ll make sure it doesn’t happen again.

“The Chief Justice’s remarks as far as not being aware of the overspending is not a good argument, because — you know, obviously, if he’s not aware of it and they have full authority over their budget — then maybe we should have oversight and we should let the citizens decide at the ballot box and whether this constitution amendment should pass,” Folk said.

Another issue gaining traction would call for the a restructuring of the state Board of Education. A resolution in the Senate would allow the Legislature to pass laws to control the structure of the board. Over in the House, HJR 103 — a resolution with more specific language — would give the Legislature oversight of the Board of Education’s rule-making process. It also calls for the board to be reduced to nine members — six of whom would be elected and three appointed by the governor.

Currently, the governor appoints nine of the boards 12 members — with the remaining three non-voting ex-officio members who respectively serve in the role of state superintendent of schools, chancellor of the West Virginia Higher Education Policy Commission, and chancellor of Community and Technical College Education.

Del. Paul Espinosa is sponsoring the resolution that could bring about these changes.

“My preference would be to establish a relatively small districts around the state so that you have equal representation around the state. I know in the Eastern Panhandle, for example — which is the area the state that I represent — we’ve had representatives on the state school board from time to time but it hasn’t been very consistent,” Espinosa said.

“It would be my hope that, by electing six of those state school board members, you can ensure that you have representation from around the state,” he added.

Those opposed to the measure, including the West Virginia chapter of the American Federation of Teachers, argue that the influence of money could give educators a lesser chance of serving and muddy the functions of the board with politics.

Another issue gaining early traction is abortion. While not yet formally introduced this session, many rumblings around the Capitol indicate a resolution is coming that could limit or possibly end taxpayer-funded abortions through Medicaid.

Some Democrats are already voicing concerns about the motivation for a such a measure.

“I just worry that, you know, one of the ideas that’s floating around it’s being done for electioneering purposes to draw out the ballot. These are things that they think would excite the base of the majority party,” said Del. Barbara Fleischauer.

“So, I worry about that. But, you know we’re going to deal with things on a topic-by-topic basis and try to be objective.”

With so many constitutional amendments being discussed and garnering so much attention, many lawmakers point out that citizens should be reminded that they would have the final say on any of these issues under the Legislature’s consideration.

Senate Judiciary Chair Charlie Trump said they’re keeping this in mind, particularly the language used that would inevitably translate to the ballot.

“You know for some constitutional amendments it’s impossible to print the entire text of the amendment on a ballot,” Trump said. “So, it is important that the ballot is worded in such a fashion that the people do understand what the effect of its ratification would be.”

As for the number of resolutions currently being discussed, Trump said he has full faith that the voting public will be able to make sense of each measure.

“I don’t worry about the voters being confused. I think we make a mistake any time we underestimate the citizens of the state. It is after all their constitution and we are all bound by whatever it says and the citizens have the right retain the right to direct what the constitution will say and provide,” said Trump.

Resolutions calling for constitutional amendments require a two-thirds majority of both chambers of the Legislature and the governor’s signature before going to a vote of ratification by the general public via a ballot measure.