Earlier this week, the West Virginia Legislature’s Joint Committee on Finance heard from a West Virginia Association of Counties official about the significant potential fiscal impact of the Property Tax Modernization Amendment. If passed, the amendment – which will be on the ballot this November for voters to consider – would lead to the fulfillment of a long-term goal of state legislators to take control of a significant portion of property tax revenue in order to give mostly out-of-state businesses a large tax cut. If passed, it would amend the constitution to give the state legislature the authority to exempt business machinery and equipment, business inventory, and personal vehicles from property taxation, resulting in 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.
According to the West Virginia Association of Counties’ testimony, 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. At $515 million, the property tax amendment would give the legislature control of 27 percent of total local property tax revenue in the state.
Of that $515 million, approximately $340 million funds local school districts, $138 million funds county government services, $35 million funds municipal government services, and only $2 million funds state government. In addition, $205 million of the $515 million comes from excess and bond levies that were approved by voters in those counties. But if passed, the property tax amendment would take control over the full $515 million away from local governments and voters and give it to the legislature.
While the proposal has been framed by proponents as “relief for taxpayers from their car tax,” over 70 percent of the potential tax cuts would go to businesses. The property tax on individual vehicles accounts for less than one-third of the potential tax cuts under the property tax amendment. In addition, industrial property taxes are highly exportable, meaning very little of the savings would stay in West Virginia, largely flowing to businesses headquartered out-of-state instead.
Previous attempts by the state legislature to reimburse local governments for the lost revenue from similar proposals would have made West Virginia’s tax system more regressive, relying on increased sales taxes – which fall more heavily on low- and middle-income tax payers – to pay for a tax cut that would largely benefit out-of-state consumers, corporations, and shareholders.
The personal property tax directly funds the benefits businesses and the people of West Virginia receive from local governments: police and fire protection for the property itself and local schools that attract and educate current and future employees. Make no mistake, this amendment is an attempted power grab that would weaken local governments’ ability to make the investments that promote growth, in favor of more dubious tax cuts.
