Committee takes look at tax repeal

CHARLESTON — The legislative committee took up a possible amendment to the West Virginia Constitution paving the way for eliminating the business and inventory tax.

The House Finance Committee took a look Wednesday morning at House Joint Resolution 17. The resolution proposes an amendment to the state constitution stating that the taxation of tangible inventory, machinery and equipment as personal property used for businesses can only be done by the Legislature.

If the resolution is passed by the House of Delegates and state Senate, the voters would get to decide on whether to approve the amendment during the 2020 general election.

Eliminating the business and inventory tax has long been a goal of state Republican legislators, as well as companies and interest groups. These include the West Virginia Business and Industry Council, the West Virginia Manufacturers, the Associated Builders and Contractors, and the West Virginia Chamber of Commerce.

“This is a first important step to untying the hands of future legislatures,” said Del. Jim Butler, R-Mason. “I think we need to take this first step in order to come up with a mechanism to remove this burdensome tax that’s keeping jobs out of West Virginia and keep our residents, our citizens, productive and prosperous.”

The constitutional amendment is only the first step, but HJR 17 would need the support of two-thirds of the members of both chambers in order to pass.

In the Senate, it would need 23 senators, and in the House the resolution would need 67 delegates. Both chambers would need some Democrats to join with Republicans to successfully put the amendment on the 2020 ballot.

Del. Isaac Sponaugle, D-Pendleton, spoke out against the amendment, saying it has no chance of House Democrats supporting the resolution.

“It’s only half a bite of the apple,” Sponaugle said. “I believe we have a responsibility as a Legislature, if we’re going to do this, to state an entire plan, not half a bite of an apple.”

If the resolution passes both chambers and if voters approve the constitutional amendment in 2020, it would still take further action by the Legislature to phase out the business and inventory tax. County governments, city governments and school systems rely on some of the property tax revenue generated by the business and inventory tax. The last time the section in the constitution dealing with the business and inventory tax was amended was 1932.

According to the West Virginia Center for Budget and Policy, the revenue from the machinery and equipment tax made up 35 percent of the total of business personal property tax revenue in fiscal year 2016. The tax revenue for inventory was 19 percent. Together they accounted for $209 million in tax revenue in 2016.

A report from the state chamber acknowledges the issues with loss of tax revenue at the county level but offers no specific solutions.

According to the report, “The primary issue for local governments has two parts. First, what will be the source(s) of the additional revenue and, second, how will the additional revenue be distributed in order to hold the local levying bodies harmless? While the first part of the primary issue is challenging, the second part of the issue is even more daunting because some counties have more tangible personal property than other counties. Simply put, distribution of the make-up revenue on a per capita basis cannot achieve the desired result.”

HJR 17 now heads to the House Judiciary Committee.