With tax reform on the West Virginia Legislature’s agenda, attention has once again turned to West Virginia’s business personal property tax. In October, the conservative anti-tax group The Tax Foundation testified to the Select Joint Committee on Tax Reform that moving away from the business personal property tax would help attract businesses and grow the state’s economy, while the state’s business community has also pressured the committee to repeal the tax. Read PDF of full report.
While proponents suggest that eliminating taxes on business personal property would boost investment and job growth, there is little evidence to support those claims. Instead, eliminating the tax would have a profound impact on state and local government finances. The revenue loss would strain the ability of municipalities, county governments, and school districts to provide needed services and would likely lead to cuts in services or a dramatic tax shift, such as higher property taxes on homeowners or higher taxes on real property owned by small businesses.
Key Findings
- The tax on business personal property accounts for an estimated 19 percent of all property tax revenue in the state. Overall, property taxes in West Virginia are below average for individuals, homeowners, and most businesses.
- Compared to other major taxes, the property tax is a more stable source of revenue, especially during economic downturns. This helps ensure that the state has enough resources to maintain investments in education and other important public services.
- Numerous studies provide significant support to conclude that business taxes do not play a significant role in business investment decisions, and that tax cuts are not an effective method to grow the economy and create jobs.
- If business personal property were fully exempted from taxation, county and municipal governments would lose an estimated $101 million in property tax revenue for FY 2015.
- Eliminating the property tax on business personal property would cause local school districts to lose an estimated $202 million in revenue. In response, the state’s contributions to the School Aid Formula would increase by an estimated $80 million, but school districts would still face a funding gap of $122 million. Without legislative action, local school districts would be unable to fill this deficit, and the state would need to provide this additional revenue to maintain the current educational system.
