Legislative leadership appears poised to pass yet another round of corporate tax cuts that will hurt working families, our schools and colleges, and push more money out-of-state to large corporations. It doesn’t have to be this way. Lawmakers could instead put their efforts toward investing in our communities, our health, our education, and the workers who build the economy.
Over the past couple of years (and in prior decades) some lawmakers and corporate lobbyists have pushed to eliminate the business personal property tax, which covers inventory, machinery and equipment, tools, and fixtures (such as built-in shelving), and also includes a local property production tax on natural gas and oil production.
Altogether, this tax raises about $400 million each year that mostly goes toward paying for schools. There have also been proposals to eliminate the tax for only “industrial” personal property, which can include manufacturing, coal mining, and natural gas and oil extraction and processing (think proposed Appalachian Storage Hub). Local governments collected about $130 million in industrial personal property taxes in 2017.
According to the Lincoln Land Institute, 35 states had taxes on business personal property in 2017. And many of the states that exempt business personal property either have higher taxes on “real” business property (land and buildings) or have other state and local business taxes to make up for the revenue loss. For example, Pennsylvania has a corporate income tax rate of 9.9 percent compared to West Virginia’s rate of 6.5 percent.
The proposal to cut the business personal property tax comes on the heels of past failures to boost economic growth with large corporate tax cuts. West Virginia eliminated its business franchise tax and slashed its corporate income tax rate between 2006 and 2015, costing the state at least $250 million annually in lost revenue this year. Since these tax cuts were enacted the state has experienced virtually no net gain in jobs over the past 12 years.
Meanwhile, the lost revenue from the corporate tax cuts has meant millions in cuts to our colleges and universities, the privatization of government services, ultra-low pay for school and state employees, hiring freezes and fewer investments in communities. The only significant tax increases over this time have been ones that fall harder on low-and middle-income families, such as increases in sales taxes, motor vehicle fees and tobacco taxes. This has all been part of a massive effort over the past decade to shift tax responsibilities away from corporations and onto working families while cutting important public investments.
Businesses need these investments. Property taxes, including business property taxes, are closely tied to the direct benefits businesses receive from local governments. Businesses rely on police and fire protection for their personal property and high-quality local schools that attract and educate their employees. Eliminating or scaling back the business personal property tax could further shift the tax responsibilities onto homeowners or lead to further cuts to schools and local services such as county sheriffs, local fire departments and police.
If our goal is to boost manufacturing and other business development, we need to put our efforts into policies that we know work and have a solid return on investment. This includes helping small- and medium-sized manufacturers compete through customized job training and extension services, making land more developable through better amenities, infrastructure and environmental clean-up, and enhancing the skills of the work force.
We have seen time after time that huge tax cut giveaways to large wealthy corporations do not trickle down to everyone else. It is an old framework based on a discredited set of ideas of how the economy works and will deprive us of the ability to make the important investments that benefit us all.