Rebecca McPhail, president of the West Virginia Manufacturers Association, recently authored an op-ed on the legislation to place the business inventory tax, which is now protected by the state constitution, up for a referendum in November 2022.
Indeed, the state Republican Party is on a tax-cutting spree (and when are they not?), and so it’s not surprising that this tax, a perennial target of GOP lawmakers, would again find itself in the crosshairs.
Just last year, speaking before the state Senate, McPhail said the tax repeal is a “nonpartisan issue.” She’s right, in that money is money, whether there’s a D or an R next to your name. And businesses would no doubt stand to save a considerable amount of money.
But it’s not simply a business tax on the chopping block.
McPhail’s argument frames the sought-after repeal as a move to put power back in the hands of voters to decide West Virginia’s business tax structure. That’s all well and good, except that what’s not mentioned in her piece, or generally by other proponents of this move, is that the business inventory tax repeal, without any mechanism to replace its revenue, would result in a loss of up to $400 million in revenue.
The brunt of this loss would be borne by public schools and municipalities — particularly in counties that produce the most coal.
Hasn’t public education already lost enough this session? Bill after bill has targeted, directly or indirectly, our state’s public schools, from elementary schools to our flagship public universities. I understand the importance of business success to the quality of life in West Virginia, but why is it that gifts to businesses — and make no mistake, this would be a substantial gift — so often are paid for by the kids and young adults of the state?
Hoppy Kercheval, too, characterized the business inventory tax as a “burdensome anti-business tax” in a January 2020 op-ed. Why, I wonder, is this tax not seen as being equally pro-education, since it provides such a huge amount of funding for schools?
The arguments from the business community for the repeal of this tax don’t always paint a complete picture.
The business inventory tax is made out to be a giant red flag, warning businesses not to locate here. In reality, however, it’s been shown through research — and in West Virginia’s case, anecdotally — that business taxes simply don’t make a significant impact on where firms choose to locate. If they did, our state would have been flooded with new businesses during the past 10 or so years, after lawmakers, both Democrat and Republican, slashed corporate tax rates, nixed the prevailing wage, and passed right-to-work.
Even Gov. Jim Justice admitted as much during a recent town hall, where he was touting his income tax repeal plan.
Are you seeing the pattern yet?
The Republican Party paints every tax in the book as horrible, and then campaigns relentlessly until it’s lowered or outright repealed. When that doesn’t produce the desired result, they move on to another tax — with the battered hulls of tax-funded programs that benefit countless West Virginians in their wake.
From 2006 to 2015, West Virginia cut corporate taxes by $225 million — with no appreciable job growth to match. Will West Virginia voters ever tire of this legislative shell game?
Further, the idea that our state’s business taxes are particularly onerous, relative to those in other states, is misleading. As noted in a 2010 study by the West Virginia Center on Budget & Policy, “Overall, West Virginia’s effective tax rate on business (real and personal) property is 2%, which is only 0.2% higher than the national average.”
According to the right-leaning Tax Foundation, as of 2019, West Virginia has the 18th-best business tax climate in the nation. And a Center on Budget & Policy analysis of data from the U.S. Bureau of Economic Analysis and the Lincoln Institute of Land Policy found no obvious relationship between industrial tax rates and manufacturing job growth.
The tough truth to accept is that our state’s halcyon days, during which Union Carbide, DuPont and other huge chemical, coal and manufacturing firms enjoyed robust employment here, are long past, and are unlikely to return, due — and this detail is critically important — largely to factors out of the control of state and local politicians.
The world at large has changed, and West Virginia, in its stubbornness, has failed to adapt. We are, in a very real way, being left behind.
When it comes to manufacturing, coal and other such industries, there’s a Zen proverb our state leaders would do well to take to heart: Let go, or be dragged.
When will we tire of being dragged?