CHARLESTON, W.Va. -- Further increases in the homestead exemption for senior West Virginians could hurt the state's ability to compete for economic-development projects, the state's deputy secretary of revenue told legislators Tuesday.The exemption saves about 188,000 West Virginia homeowners age 65 and older $47 million, Mark Muchow said. He noted the state's eligible senior population is expected to grow 37 percent in the next decade.Increasing the exemption -- which applies to the first $20,000 of assessed value for the residential property -- would require increasing other taxes to make up for the revenue loss to already cash-strapped counties, Muchow told a legislative interim finance committee.Asked by House Finance Chairman Harry Keith White, D-Mingo, whether the Legislature should consider increasing the exemption, Muchow said, "If you're interested in economic growth, one of the last things you want to do is raise the homestead exemption."
He noted that even without the exemption, West Virginia has some of the lowest residential property tax rates in the country.Property taxes are twice as high in Ohio and Virginia, and three times higher in Maryland and Pennsylvania, he said.
The three states that have comparable property tax rates -- Alabama, Arkansas and Louisiana -- provide for local sales taxes to allow counties to make up the lost revenue. That results in 10 percent sales tax rates in places such as Birmingham and Montgomery, with no tax exemption for groceries, Muchow said.Muchow said West Virginia adjusts for its low real property tax rates in part by imposing comparatively high personal property tax rates.A factory located in West Virginia pays an average personal property tax rate of 1.404 percent -- two to three times the tax burden on similar facilities located in neighboring states, he noted. High personal property and inventory taxes are frequently cited as an obstacle to attracting new businesses to West Virginia.Muchow noted that even at its current level, the homestead exemption is a notable tax break.He used a $300,000 home in Shepherdstown as an example. The owner of that house, if he were younger than 65, would have property taxes of $2,334 this year. However, a homeowner eligible for the homestead exemption and related tax credits would have a tax bill of $764 for that property.Unlike most states, West Virginia property taxes are not in state code but in the state constitution. That means voters would have to approve an amendment to the constitution to increase the exemption. In the 2012 regular legislative session alone, 17 resolutions were introduced to put a homestead exemption amendment on the ballot.Reach Phil Kabler at firstname.lastname@example.org or 304-348-1220.