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Tax Break Could Affect Our Area Adversely

It’s been said that the relationship between tax cuts and economic growth is complicated. This is a lesson that we know all too well in West Virginia, as the lowering of taxes has not always resulted in economic expansion.

West Virginians should keep this in mind when it comes to the effort currently underway to repeal the personal property tax on manufacturing machinery, equipment, and inventory. While I’m normally supportive of reducing business taxes, I’m concerned about the substantial decline in revenue that our local cities and counties will face if this tax is eliminated. In addition, I’m not convinced that this cut will provide a pathway towards prosperity as some are claiming in Charleston.

Many states have inventory and/or machinery and equipment taxes. However, some states have eliminated the tax. For example, Ohio got rid of its business personal property tax, but the impact was less than desirable. According to a recent study, Ohio lost thousands of jobs because firms there decided to invest in capital rather than hiring new workers when they received this tax benefit. If we were to repeal the tax, we could end up with more robots and fewer West Virginians at work.

Of even greater concern to me is the monetary loss that Northern Panhandle counties would suffer if this tax were to be repealed. Because our region does much of the heavy lifting when it comes to the steel, chemical, and manufacturing industries, we benefit tremendously from this tax. If it were to be eliminated, the Northern Panhandle would lose $18 million each year. Annual funding would be reduced in Hancock County by $5,513,522; in Brooke County by $6,151,029; in Ohio County by $1,130,276; and in Marshall County by $5,258,580.

These funds are used by our cities and counties to pay for police and fire departments, senior services, animal shelters, road repairs, and public schools. Local officials have expressed serious concern to me about this potential loss in revenue.

Our area is made up of tough, resilient people, but I’m concerned about how we’d respond if this funding disappeared.

The leadership in the legislature has promised that we can replace this lost revenue but has yet to show us how. According to West Virginia University, the state has projected budget deficits of $170 million in 2022, $157 million in 2023, $171 million in 2024, and $164 million in 2025. In these tough financial times, I have difficulty seeing where the replacement revenue will be found.

I’m also uneasy about the future revenue we’d be sacrificing. I believe that our area will see significant manufacturing growth due to our access to the river, to railways, to interstate highways, and to an international airport. Those factors, plus the resources that lie beneath our feet, give me hope. The repeal of this tax will prevent us from capturing the kind of revenue being generated in Doddridge County, where a natural gas processing plant has been constructed and the county’s coffers have been filled.

If I thought that the repeal of this tax would solve the financial woes of the state, I’d vote for it today. However, I’m skeptical that we’ll see the growth some are predicting. Before this measure will have my support, I’ll need to see how our cities and counties will be made whole and to be assured the tax burden won’t simply be shifted to West Virginians.

The West Virginia Legislature has made bad deals in the past and we can’t afford for it to make another one — one that could have an adverse impact upon the future of our great state.

Ihlenfeld, of Wheeling, represents the First Senatorial District in the West Virginia State Senate.

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