The 2021 legislative session is racing toward its conclusion, and taxes have been high on the mind of Gov. Jim Justice and the West Virginia Legislature. At the West Virginia Manufacturers Association, our attention is on a tax resolution that would put voters in charge of how the state taxes property, machinery and equipment.
Currently, the state Constitution prevents legislators elected by West Virginia voters from adjusting the inventory tax to reflect state and local economic conditions.
House Joint Resolution 3 would give West Virginia voters the opportunity to untie the hands of our Legislature. If passed, HJR3 would put a question before voters on whether the Legislature should be able to address the way we tax tangible personal property. This includes taxes on inventory, machinery and equipment of the state’s manufacturers and inventory held by our small businesses and personal vehicles owned by West Virginians.
Critics of this effort say we should not allow the Legislature to adjust property taxes. But if not our elected representatives, then who? Critics also are trying to paint HJR3 as some immediate overhaul of our property tax system. This could not be further from the truth.
Passage of HJR 3 changes nothing in our tax structure. It does not change or reduce tax rates on personal property, and it does not affect state or local budgets. All HJR3 will do is put the voters in charge, as they should be.
The manufacturing community in West Virginia has tried for several years to bring more flexibility and fairness to the taxes levied on tangible personal property, machinery and equipment. Our current tax structure penalizes capital investment and acts as a disincentive to investing in West Virginia, but the Legislature is powerless to change it without the voters allowing things to change.
We are one of only two states in the nation that tax manufacturing inventory, machinery and equipment without offering broad-based exemptions for manufacturers. The application of these taxes creates a competitive disadvantage for the Mountain State.
Despite West Virginia’s positive overall ranking for taxation, the state ranks 46th for capital intensive manufacturing taxation. This position does not bode well for long-term manufacturing retention and growth.
Passing HJR3 is a necessary first step in helping West Virginia modernize its tax system. HJR3 will give voters the power to customize our tax system and maximize our enormous potential for growth and development. The House of Delegates passed HJR3 with bipartisan support, and we hope the Senate will do the same.