State eyes ending personal property, equipment and inventory taxes

Jun. 17—BLUEFIELD — A renewed move is on to end the state equipment and inventory tax as well as personal property taxes, with lost revenue at the county level replaced by the state.

Voters will see the issue on the ballot in November as the Property Tax Modernization Amendment.

State Sen. Chandler Swope, a long time advocate of ending the taxes, said the issue was on the agenda of the committee interims in Charleston earlier this week and it is on track.

"The amendment is already on the docket for the November election," he said.

Swope said the advantages for ending the taxes are great.

"One of the biggest things we can do to bring jobs here, and it is the number one agenda this year, is get rid of the equipment and inventory tax and the property taxes," he said. "Last year, we thought cutting the personal income tax would have a higher rate of return on investment but it turns out these taxes would."

Swope said hundreds of companies cancel West Virginia out because of those taxes.

"We believe we will get about $500 million a year worth of replacement money (as businesses and people come in)," he said, referring to making up the lost revenue in ending the equipment and inventory tax and personal property taxes, which include vehicles owned by residents.

When ending those taxes has been discussed in the past, counties complained they would lose too much money since a huge chunk of revenue for counties and school systems comes from the tax.

Swope said he was recently in a meeting with assessors from around the state and they thought real estate taxes would need to be doubled to raise enough money to make up the lost revenue.

"No, you won't," Swope said he told them. "We are going to backfill all the money, plus extra, with general revenue money."

But that is a hard message to deliver to localities, he added.

"The problem is, counties and school boards don't trust the Legislature to replace the money," Swope said. "I live in Mercer County. There is not one single legislator who doesn't live in a county. There is not one single legislator I know who is going to vote to cut taxes and say, 'Oh, good, I just cut your taxes, but how about helping me get elected again' (when taking away funds for the county and schools without replacing them and forcing localities to raise taxes)."

"That would be political suicide," he said.

"We think that is a very good way to do it," he said of ending the taxes. "But the counties, the assessors association was told just last week by the tax department, "Oh, you won't get the money back.'"

"We are going to have a bill written prior to the (November) election to show exactly how we are going to replace the money," he said, adding that it is complex to put it all together and he is not sure when the details will be released. "But they are working on it as we speak."

Tax revenue statistics from counties were just received, he said, and those numbers are necessary to determine how much money the state will need to replace.

Swope said the House, the Senate and Gov. Jim Justice are "totally" behind this.

"I am excited about what we are doing," he said, but cautioned about misinformation and urged people to seek facts.

Not only will the money to counties be replaced, Swope said discussions in caucuses reported, "We will round it high, we will do 10 percent more."

Swope said the state has the money to do this.

West Virginia is creating an economic environment that's "better than it's ever been," he said, with growth continuing and a surplus of $1.2 billion this fiscal year, which ends June 30.

"We expect a similar amount next year," he added.

Ending the business and inventory tax and the personal property tax will make it even better, he said, because that action will entice more businesses, and people, to locate to the state.

"We are doing major benefits to the economy and West Virginia," he said.

Swope said the money is not from one-time revenue, but from "organic growth" in the last three years, which will continue.

For counties, the issue has always been if the state has a mechanism in place to replace lost local revenue, which can be substantial.

Swope said the funding mechanism will be there because the state can afford it and money the state spends now will eventually be made up with increased revenue from new businesses and more people moving here.

Mercer County Commissioner Greg Puckett remains concerned about the funding mechanism, but said the County Commissioners Association of West Virginia has been in discussions with legislators on the issue.

"We value our continued dialogue with our state officials so we can come up with a comprehensive plan to make counties whole," he said. "If we lose the revenues at the local level without some kind of mechanism in place to backfill the lost revenue counties would have to cut services."

Puckett said schools get more than 70 percent of the personal property taxes so they would be hurting without it.

The county uses the revenue to support law enforcement, public safety and infrastructure.

"There are a lot of things we use those funds for," he said. "It is a concern."

Puckett said that, in theory, it "sounds like a good idea, but without a funding stream ready, county commissions are very concerned on how we can make up lost revenue" on a long-term basis. Where is the long-term revenue revenue stream coming from?"

But everyone involved is working together to try to make it work, he added.

Mercer County Assessor Lyle Cottle said those taxes bring in a lot of money to the county and cities, almost $11 million in 2020, with the bulk of it, about $8 million, going to schools.

Cottle said he is going to Charleston Tuesday to meet with legislators who will provide more details on what they plan to do.

Regardless, it would be a huge issue for the county to lose that money if it's not replaced.

Swope said residents will like it because the personal property taxes can be high, and it would save them money.

Cottle said the average tax ticket on a vehicle in Mercer County is based on a percentage of "book value" and is about $450, and can be over $2,000 on more on expensive vehicles, with differing taxes if located inside city limits.

"I will pay over $1,500 this year on my truck," he said, and one thing that is hurting is the fact the price of vehicles has skyrocketed, and when the tax tickets go out next month, they will based on the updated (by the day) NADA value.

Cottle said residents would benefit and, it would be a good thing for everyone, "if the state has plan in place to backfill all of the lost revenue."

If the amendment passes in November, the legislators must still craft a bill, Cottle said, and then it must be passed and signed by the Governor with a timeline of when it takes effect.

"Maybe they will pass it next year," he said, or it may be down the road.

Not all organizations are on board with the move.

The West Virginia Center on Budget and Policy said the amendment could cost schools and local governments a total of $515 million a year.

In a recent article posted on its website, the results would be "a severe loss of revenue for counties and local governments and marking a significant shift in power away from local governments and to state government."

The article said that, according to the West Virginia Association of Counties, 2021 property tax revenue included $219 million from business machinery and equipment, $84 million from business inventory, $26 million from other business personal property, $136 million from personal vehicles, and $50 million from "supplemental" property taxes, or taxes that were owed from previous years but paid in TY 2021, summing to a total of $515 million."

— Contact Charles Boothe at cboothe@bdtonline.com

Contact Charles Boothe at cboothe@bdtonline.com