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‘Inventory’ tax repeal fails

By Staff | Mar 6, 2020

The effort by the West Virginia Manufacturers’ Association to repeal what it falsely calls the “inventory” tax has failed again.

I use the word “falsely,” because that term seriously misrepresents what WVMA was trying to do. What they’ve really tried to do, over several years now, is to eliminate the personal property tax on mining and manufacturing. The personal property tax is indeed placed on inventory, but it’s also placed on equipment. And a lot of business “inventory” is taxed as personal property, but the WVMA doesn’t want it removed from retail or other businesses (many of them small). Was the word “inventory” used to give the false impression that retailers would benefit?

As this tax is in the state constitution, not in statute, removing it requires a constitutional amendment. Accomplishing that takes a 2/3 vote of each house of the Legislature, followed by the approval by voters at a referendum.

The WVMA argues the personal property tax discourages business. I agree, it’s a bad tax. But the Tax Foundation, a non-profit that most observers believe has a conservative point of view, says West Virginia’s overall business tax structure is the 17th most favorable of all the 50 states. Almost every state has one or two taxes that are more trouble than their worth.

The WVMA proposed to replace the personal property tax with an increase in the sales tax and an increase in tobacco taxes. I think the latter is a good idea, but not in this context. The combination of tax reductions and corresponding tax increases would have effectively transferred more of the burden of paying taxes away from big out-of-state corporations and onto average West Virginians.

The Senate took up the proposed constitutional amendment on Feb. 26, and it failed to get the necessary 2/3. The vote was 18 in favor and 16 against.

The original proposal would have blown a $140 million hole in the state budget. But by the time the idea had reached the floor of the Senate it had grown to include the removal of the entirety of the business personal property tax, as well as the removal of the automobile tax levied on individuals. The price tag had now ballooned to well over $300 million.

For the first time in many years I had worried that the effort to remove that tax might have a chance of success. Along with Delegate Tim Miley of Harrison County (the minority leader), I drafted a proposal to eliminate only the car tax. The price tag on that would be about $100 million.

The state’s finances are not in good shape. Now is not the time to be cutting taxes. But I reasoned that if we were to blow a hole in the budget, let’s at least make sure that average West Virginians get the benefit, not a few out-of-state corporations.

The proposal failed in the Senate, so the House will not need to consider it. It’s dead, at least for another year.