One of the key agenda items for Senate leadership this legislative session, a plan to phase out personal property taxes on manufacturing equipment, machinery and inventory, fell to defeat Tuesday.
After more than two hours of spirited debate, the West Virginia Senate rejected the joint resolution for a proposed amendment to the state constitution (Senate Joint Resolution 9) on an 18-16 vote, falling short of the required two-thirds majority for adoption. Two Republicans joined all 14 Senate Democrats in opposing the resolution.
It was a stunning defeat for Senate leadership, which had promoted repeal of the so-called inventory tax as the key legislative and economic development issue of the session.
Senate Finance Chairman Craig Blair, R-Berkeley, anticipating the resolution’s defeat, gave a fiery floor speech, vowing to keep pushing for the business tax cuts.
“I’m married to this issue, and I’m not getting a divorce. I’m going to stick with it,” he said. “I’m not giving up until it’s done.”
He added, “We’ve done it right. We’ve done it transparently. We’ve done it well. It’s a sad day for West Virginia because it’s going to have to wait for at least two more years.”
Passage of the resolution appeared doomed Monday when a companion measure (Senate Bill 837) to phase out the manufacturing inventory taxes, along with taxes on other business inventory and — to sweeten the deal for state voters who would have had to approve amending the state constitution — to phase out personal property taxes on motor vehicles, narrowly passed the Senate on a 17-16 vote.
That would have cut revenue collection for counties, school boards and cities by $300 million, with the bill making up about $200 million of that deficit with a 0.5 percent increase in the state sales tax, and sharp increases on taxes on cigarettes and other tobacco and vaping products.
On Tuesday, Sen. Mike Romano, D-Harrison, said Senate leaders were using deception and facades to portray the tax increases on residents as tax relief through the phase-out of the motor vehicle tax.
“The thing about Democrats is you can’t force us to vote for bad policy,” he said.
Several opponents of the proposal complained that it would take autonomy away from county commissions, making local governments and school boards dependent on the Legislature to be “made whole” financially each year.
Sen. Paul Hardesty, D-Logan, noting that, in his previous career as a legislative lobbyist for Fortune 500 companies, he would have favored the tax breaks, said of his current position, “I’m representing people in a five-county region who have it as tough as anyone in this state.”
He noted, “I believe county government autonomy will be severely impaired by passage of this resolution.”
Opponents also said that previous attempts to grow the economy through business tax cuts, tort reform and right-to-work laws had actually had minimal impact on the state economy.
“There may be a point to that,” Senate Judiciary Chairman Charlie Trump, R-Morgan, responded. “That doesn’t mean we stop trying.”
He later called for bipartisan support of the resolution, saying, “Let’s do something great together, right this moment. Let’s adopt this resolution, and send it to the House of Delegates, and let’s give the people of West Virginia the right to decide if they want to give this power to the Legislature.”
In the height of the Great Depression, West Virginia voters in 1932 approved a constitutional amendment moving all property taxes — including real property taxes that were not addressed in either the bill or resolution — from state Code to the constitution.
Sen. John Unger, D-Berkeley, said that was done to protect property owners from legislative shenanigans, such as the proposed bill and resolution.
“It’s a deception. It’s evil. It’s deceiving the people of West Virginia,” he said of the leadership’s plan.
Blair offered a different perspective, saying, “It’s a Depression-era constitution, and it’s done a really good job of taking the state of West Virginia from one of the best states in the U.S. to one of the poorest.”
Another key issue of concern from opponents of the measure was how the state would make up the $100 million shortfall from the $300 million a year in tax cuts with only $200 million a year in tax hikes.
Under questioning by Senate Minority Leader Roman Prezioso, D-Marion, Blair conceded that the House would probably remove or roll back the proposed tobacco tax increases in the bill, creating an additional $88 million a year shortfall.
Prezioso also asked if Senate leadership had worked with Gov. Jim Justice on passage of the bill and resolution, saying that Justice had met with Senate Democrats, encouraging them to vote against the proposal, citing a soft economy and holes in the 2020-21 state budget.
In an unusual move, Republicans held a brief news conference in the Senate chamber foyer prior to action on the resolution to try to drum up support for the measure.
“We’re going to have a vote on whether we trust the people of West Virginia to make this decision,” Senate President Mitch Carmichael, R-Jackson, said. “That’s the essence of the vote today. Senate Republicans stand with the people of West Virginia. We trust the people of West Virginia to make decisions on the manner in which they will be taxed.”
After the resolution’s defeat, Carmichael left the Senate chamber, having Sen. Ryan Weld, R-Brooke, preside over the session.