West Virginia Chamber - 2018 Position Papers

The West Virginia Chamber of Commerce is the Voice of Business in West Virginia. Chamber members can be found in all fifty-five counties, and employ over half of West Virginia's workforce. Through constant engagement with our members, the Chamber's committees, working groups, and staff have crafted the following position papers for the West Virginia Chamber of Commerce.

 

Issue

In our ever expanding digital world, broadband access has become a vital necessity for households and businesses alike. Broadband access has rapidly evolved into a critical infrastructure component. In recognition of this shift, many States have implemented broadband initiatives to remain competitive in attracting and retaining jobs. These broadband policy efforts have come to the forefront of State government efforts focused on economic development and job creation. It is abundantly clear that affordable, high speed broadband access is now a dominant consideration for the business community, their employees, their customers, and their supply chains.

Background

Since the advent of the Broadband Internet era in 2000, telecommunications providers have collectively invested nearly $4 billion in building a fiber optic middle mile and last mile infrastructure for commercial and residential broadband services in West Virginia. This investment has resulted in a dramatic expansion of broadband availability in the state, however, there are many rural communities that still do not have access to broadband service at speeds that meet or exceed the new FCC definition. The majority of these communities are sparsely populated and geographically removed from more populated areas of the State. Due to these factors, private sector investment in these markets is unlikely because opportunities to receive a return on their investment are very limited, if they exist at all.

The Chamber's Position

Broadband services are clearly essential to economic development, healthcare, education, business and daily life in the 21st Century. While broadband providers have and are continuing to make substantial investments in improving and expanding the availability of services in the state, broadband investments in the most rural portions of our state will remain an economic challenge because of the high cost of deployment and low customer density. The Chamber supports any state policy that will incentivize the private sector to invest in unserved and underserved markets throughout the State. For example, the State should consider the use of tax credits for the provision of new broadband service in underserved and unserved markets, as well as the creation of a loan guarantee program, which will assist smaller companies by providing access to capital so that they can invest in these same geographic areas.

The Chamber also believes that any plan approved by the Legislature should be focused on creating incentives for private providers to invest their resources in broadband service extensions, and that any scarce state resources which might be devoted to broadband projects for unserved areas should operate through an open and competitive process.

 

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Issue

West Virginia has made significant progress in the past few years in adopting meaningful civil justice reform legislation. Many of the laws that made West Virginia stand out in a negative light have been resolved by the decisive actions of the 82nd and 83rd West Virginia Legislatures.

Thanks to the reforms that have been undertaken, legal experts both inside West Virginia and throughout the nation recognize that steps are being taken to ensure West Virginia will become a place with fair and consistent laws.

Despite the progress, some additional reforms must be passed to continue the goal of bringing West Virginia into step with the rest of the nation. Legislation that is still needed includes: the creation of an intermediate appellate court, online case management system, medical monitoring, collateral source rule, phantom damages, fair mediation system, and seatbelt use admissibility.

These reforms are needed in order to continue towards the goal of “Making West Virginia Irresistible to Business.”

The Chamber's Position

Provided are the components necessary to enact additional legal reforms that will eliminate risks and impediments on West Virginia employers and revitalize the state so it truly can grow its economy.

  • Intermediate Appellate Court – The West Virginia Chamber believes an appeal of right is fundamental to equal justice and due process. An intermediate appellate court should be established to ensure every person has the chance for a full and thorough appeal without unduly burdening the caseload of the West Virginia Supreme Court of Appeals.
  • Collateral source – Allow courts to consider amounts that plaintiffs have received as compensation from other, non-family sources to cover costs in determining damages. When juries are trying to determine how much economic loss a plaintiff has suffered for compensation, they should consider all sources, which offset that economic loss in determining a just verdict and avoid unfair double-dipping by jury award winners.
  • Phantom Damages – Allow plaintiffs to recover only the amounts actually incurred for medical services, rather than the full sticker price that is listed before negotiations are completed.
  • Online Case Management System – Implement a statewide and uniform online system for case management of all circuit and family courts in West Virginia.
  • Fair Mediation – Mediations are very successful in resolving civil cases without the expense of a trial. Some circuit court judges who will preside over a trial, however, opt to mediate the case themselves rather than assign it to a different judge or mediator. This can have a chilling effect on the ability of parties’ to speak candidly about issues. Legislation should be passed to require a mediator to be different than the judge would potentially preside over a trial.
  • Seatbelt Admissibility – West Virginia law requires the use of a seatbelt in a moving vehicle. Failure to comply with this law can lead to increased risk of injury or death in the event of an accident. Legislation should be adopted that allows evidence of whether or not a seatbelt was worn to be admissible into court, thereby allowing a judge and/or jury to weigh all aspects of a case.
  • Medical monitoring — In 1999, the West Virginia Supreme Court established a new cause of action, which allows an individual who has been exposed to a proven hazardous substance to recover damages for future medical monitoring when the individual has no physical injuries. This new cause of action exposes many of West Virginia’s businesses to potential liability even though there is no actual injury associated with the exposure. The Legislature should enact legislation to correct the Court’s decision.

This list of recommended provisions is offered as a series of additional legal reforms which would further bring West Virginia into the mainstream of other states in trial court lawyers.

 

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Issue

The business case for employee diversity is real. Diversity in the workplace is beneficial. People with different backgrounds bring different perspectives and create a more robust, stimulating, and vibrant environment from which everyone can learn and grow. In turn, the expanded base of knowledge leads to more creativity and innovation in the workplace. A diversity of opinions naturally leads to higher quality decisions and improved performance.

Discussion

West Virginia Chamber of Commerce members employ more than one-half of the state’s workforce, giving the Chamber a large and influential voice to articulate workforce needs and preparedness. We are a solutions oriented, member supported organization that gives voice to the needs and concerns of our state’s employers. Our members understand the struggles of finding qualified applicants for well-paying jobs.

There are numerous types of diversity within our culture, including gender, race, age, religion, national origin, sexual orientation and gender identity. Numerous studies confirm the economic reality that diversity and non-discrimination policies are good for business. Companies embracing diversity know that inclusive working environments are good for business. Studies show that employers with non-discrimination policies enjoy greater productivity and lower turnover in their workforces.

Demographic research shows that West Virginia ranks exceptionally low in terms of the racial diversity of our population. According to the 2014 U.S. Census, West Virginia’s total population is 92.5% white, 3.6% black, 1.5% Latino / Hispanic, and 0.8% Asian. West Virginia’s population is, to a large extent, racially homogenous.

In addition to issues of racial diversity, employers also recognize the importance of other types of diversity among their employees, such as sexual orientation and gender identity. More than 90 percent of Fortune 500 companies now include sexual orientation in their workplace nondiscrimination policies, and 61 percent of such companies prohibit discrimination based on gender identity.

The Chamber's Position

We need full participation and inclusion of all groups in order to move West Virginia forward. Our ability to attract new jobs and the job creators, particularly Fortune 500 companies who require diversity within their workforce, is greatly impaired without a strong commitment to diversity.

West Virginia businesses should take full advantage of the opportunities that a diverse workforce represents, and our policy makers should embrace policies that support a diverse and robust workforce in West Virginia. As the U.S. population becomes increasingly more diverse, so too will our state’s workforce in West Virginia. West Virginia’s job creators should embrace diversity and capitalize on the resulting benefits.

West Virginia must be able to attract and retain investment and talent from all backgrounds. The Chamber has long supported diversity in our state and in our workplaces. Many of our Chamber members already have existing personnel policies in effect which promote diversity and inclusion in the workplace. The Chamber also respects the strongly-held faith based views of different religious groups in West Virginia. The Chamber will not support legislation which promotes or allows discrimination, nor which sends the wrong message regarding economic development and job growth in West Virginia. Any “religious freedom” type of legislation must contain a balancing test between religious liberties and government interests, and must operate in a manner which protects the religious liberties of individuals without also infringing on the rights of others in a discriminatory manner. The Chamber will oppose legislation which creates or authorizes new causes of action against employers. Such legal actions would place our state’s employers at a competitive disadvantage with other states.

 

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Issue

West Virginia’s education policy should transform the public education system in our state so that West Virginia students can achieve the results necessary to compete in the global marketplace.

Background

The West Virginia Chamber of Commerce believes that the children of West Virginia deserve a public school system that is the envy of the nation. Our schools must produce educated, versatile, creative problem solvers and responsible, well informed citizens. Our children must be equipped to succeed in the global marketplace regardless of their economic station or background.

West Virginia Chamber of Commerce members employ more than one-half of the state’s workforce, giving the Chamber a large and influential voice to articulate workforce needs and preparedness. Our members understand the struggles of finding qualified applicants for well-paying jobs. Chamber members know that educated and skilled citizens make good workers and help to build robust communities.

When we fail to educate all children, the outcome is predictable: elementary school students with poor skills become middle school students with poor skills, and eventually become high school students without the ability to succeed in college or to compete in today's economy.

The National Assessment of Educational Progress (NAEP) is the largest continuing and nationally representative educational assessment of American students in all 50 states. West Virginia’s 2015 NAEP average scores are significantly lower than scores in 34 other states in fourth-grade reading, lower than 32 other states in eighth-grade reading, lower than 34 other states in fourth-grade math, and lower than 43 other states in eighth-grade math.

The percent of West Virginia fourth grade students who tested at or above the proficiency level in math actually decreased from 35 percent in 2013 to 33 percent in 2015. Only 27 percent of the Mountain State’s public school eighth-graders scored proficient or higher on NAEP’s science portion, which is significantly below the national average. West Virginia now ranks 42nd in the country for eighth grade reading scores.

The average West Virginia student does not perform well in other measures of literacy and numeracy. From 2012 to 2013, over 182,000 West Virginia students took WESTEST 2, a state-wide assessment test. Only 46% of West Virginia students were proficient in math at grade level, and only 49% were proficient in reading.

Yet from a spending perspective, education accounts for 21.9 percent of state expenditures in West Virginia (2015). West Virginia spends more per pupil than 30 other states (fiscal year 2014 data). West Virginia spends $11,260 per pupil, which is higher than the national average of $11,009 spent per pupil (2014 data).

The Chamber's Position

The Chamber supports efforts to improve the academic achievement of every student in West Virginia. These recommendations provide a framework for a system that allows for more authority and accountability at the local level. The West Virginia Legislature and the West Virginia Department of Education must work together to remove existing impediments that constitute the over-supervision of our education system while guaranteeing benchmarks that raise the bar for West Virginia students to compete successfully with their international peers.

  • The Chamber supports an accountability system for schools that is as easy to understand as grades A to F. Designations for schools, based on academic growth, will increase transparency, parental engagement and public pressure to improve. This kind of grading system is contributing to improved school performance in other states.
  • We know that highly qualified principals and teachers are of great importance to helping students improve academic achievement. The High Quality Education Committee should continue its work on transforming educator preparedness and transforming Professional development for teachers. We believe that the best guarantee of excellent teachers and school leaders in every school is to increase the prestige of teaching with more rigorous admissions critieria in all 13 teacher preparation programs in West Virginia.
  • The Chamber believes that innovation works in both business and in education. Public charter school legislation would allow for truly innovative schools where non-traditional operators, such as a group of educators, parents or directors could lead a school or a cluster of feeder schools to recreate itself from the ground up with new ways to best educate its kids. The freedom to operate a low-performing school differently and to move away from the “one size fits all” paradigm will create the best opportunity for students to reach their potential. Forty-three states and the District of Columbia allow charter schools; many with great success, especially in low income areas.
  • Additional opportunities for school choice should be explored in West Virginia, such as public, private, charter, home school and online educational options. These options are available in many other parts of the nation and they empower parents to be more fully engaged in their child’s academic experience.

These policy and legislative recommendations represent part of the Chamber’s long-term commitment to the multifaceted effort to transform our education system in West Virginia. We believe that all West Virginia students should be held to high expectations, with the belief that they can and will achieve success. The West Virginia school system should promote a culture of rigor that makes ‘getting an education’ a serious pursuit which leads to success in life.

The West Virginia Chamber of Commerce is comprised of our state’s leading businesses. We are a solutions oriented, member supported organization that gives voice to the needs and concerns of our state’s employers. The Chamber is committed to working with state and local officials, teachers, principals and caring citizens to assure the best for our 21st Century students.

 

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Issue

West Virginia’s coal, oil and gas resources are some of our state’s most valuable assets, but the legal framework governing development of these minerals is preventing the energy industry from reaching its full potential for the benefit of all stakeholders, including private and public interests. Certain West Virginia mineral development laws prohibit owners of a majority of the interests in the mineral estate from developing their property unless they first obtain the consent of 100% of the other mineral co-owners, known as “co-tenants.”

Background

West Virginia’s outdated co-tenancy laws present a huge development hurdle and make the State less competitive for investment and job creation. In West Virginia, ownership of the mineral estate is often highly fractionalized. Mineral owners and developers alike often are denied the opportunity to develop their minerals because of a few individuals, who are either unknown or unable to be located or who refuse to allow mineral development. The results of a recent nationwide legal review show that of the 38 energy producing states, West Virginia is one of only 3 states that require 100% agreement of the co-tenants before development can begin. In states that have adopted modern co-tenancy laws, mineral exploration may commence once a developer obtains the consent of a majority of the owners. This disparity in our law places West Virginia at a competitive disadvantage.

Full development of West Virginia’s oil and gas is further hindered by unclear jurisprudence concerning whether existing adjoining leases may be jointly developed by horizontal drilling across lease boundaries unless containing express lease integration or joint development language, even though (a) horizontal drilling is beneficial because it reduces surface use and coal sterilization, and (b) all stakeholders and courts agree that vertical drilling is already permitted under leases.

The Chamber's Position

West Virginia’s mineral co-tenancy laws are antiquated and hinder development, and such laws, along with a failure to enact an existing lease integration law, places West Virginia at a competitive disadvantage with other mineral-producing states. In order to enable West Virginia’s energy industries to operate at their full potential, West Virginia policymakers should not allow artificial impediments to inhibit efficient mineral production in our state.

The West Virginia Chamber supports the passage of reforms related to co-tenancy (allowing for development if a majority of co-tenants have agreed to development and existing lease integration, that are consistent with those of major, energy producing states. Such reforms would eliminate West Virginia’s competitive disadvantage relative to those states and would foster job growth and capital investment, broaden the tax base, and allow mineral owners to responsibly develop their resources, while still protecting the environment. To encourage the fullest practical production of energy resources and to ensure the continued growth of our economy, it is in the public interest for businesses to come together and support the implementation of these much needed reforms.

Affordable, abundant, and reliable energy resources are critical to the state’s future economy and will be the catalyst that unlocks the full potential of that economy.

 

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Issue

West Virginia is ground zero for the opioid addiction crisis. Among the many health challenges facing America, none has hit our state harder than opioid addiction. The impact of the opioid crisis on West Virginians is staggering, with more than 700 overdose deaths reported last year. According to the U.S. Centers for Disease Control and Prevention, West Virginia has the highest overdose rate in the nation, with 41.5 deaths per 100,000 people according to 2015 statistics. Less obvious, however, is the toll it has taken on the state’s economic growth and development.

Background

In West Virginia, the opioid crisis has contributed to a workforce participation challenge that undermines the competitiveness of existing businesses while creating barriers for new investments. For existing businesses, unfilled vacancies represent lost productivity that makes competing in the regional, national and global economies more difficult. Meanwhile, companies are hesitant to invest in areas where they may not be able to attract and retain the skilled and drug-free workforce they need to operate efficiently.

West Virginia has welcomed new business investments this year, creating 3,000 new jobs for the state. But workforce participation continues to decline toward historic lows, decreasing steadily since 2010. Many Chamber members say drug abuse is a key contributor to that problem. Many people actively looking for work cannot pass the drug tests required for employment. And those who do have jobs are exiting the workforce due to untreated, or undertreated, addictions.

When work is not an option, individuals turn to government programs, such as Medicaid, for support. This transition from gainful work to reliance on public assistance is creating a cyclical problem with disastrous, long-term consequences for taxpayers and the economy. According to the White House Council of Economic Advisers, the total economic cost to the nation of the opioid epidemic is over $500 billion per year. Giving patient’s access to effective addiction treatments with a goal of truly ending their addiction is our best chance at getting people back to work and improving our economy.

Our state remains highly dependent on personal income tax revenue to fund its services and programs. As workforce participation continues to drop, so will the number of individuals paying personal income taxes, leaving the state with less money to operate and exacerbating the state’s existing budgetary challenges.

Addiction is driving people out of the workforce, undermining improvements to our business environment and threatening opportunities for economic growth – a cyclical problem that will only become more difficult to break in the years to come.

The Chamber's Position

At a time when job openings and investments in West Virginia are growing, we must provide the healthy, productive workforce needed to grow the economy. To do that, treatment, with the goal of full recovery, must be a top priority for our state.

Because every person is different, health care providers and the public must be aware of all evidence-based, FDA approved treatment options. This includes counseling and medication assisted treatments proven to be effective at managing and, hopefully, ending addiction.

Providers must be prepared to develop treatment plans that consider each patient’s individual needs, which may require new education and training. At the same time, patients must have barrier-free access to the treatment they need to recover and return to healthy, productive lives.

Business leaders, health care providers and public officials must work together to address the opioid crisis by ensuring unfettered access to and education around all FDA approved opioid addiction treatments. Only by getting more individuals on the path to recovery will West Virginia truly thrive and reach its full potential.

 

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Issue

The WV Department of Environmental Protection regulatory program includes various rules, guidelines, policies and recommendations which are more stringent than necessary in order to implement their federal counterparts. This disparity places West Virginia and its citizens in a disadvantaged position relative to other states, hindering economic development and the creation of new jobs in West Virginia.

Background

The West Virginia Legislature passed Senate Bill 619 during the 2016 Legislative Session. The WV Chamber applauds this important piece of legislation. One of the stated purposes of this bill was to require executive branch agencies to review and evaluate all rules, guidelines, policies and recommendations with those of any federal counterparts, and to determine if the state’s rules, guidelines, policies and recommendations are more stringent than their federal counterparts.

S.B. 619 provides that state executive agencies, including the WV Department of Environmental Protection, must review and evaluate the rules, guidelines, policies and recommendations under their jurisdiction which have similar federal rules, guidelines, policies and recommendations; determine whether the state rules, guidelines, policies and recommendations are more stringent than their federal counterparts; provide a public comment period; and submit a report to the Joint Committee on Government and Finance and the Legislative Rule-Making Review Committee by November 1, 2017. Such report shall include a description of all state rules, guidelines, policies and recommendations which are more stringent than their federal counterparts, as well as the comments received from the public.

Working through its Environmental Committee, the WV Chamber prepared and submitted significant comments to the WV DEP, identifying those state rules and guidelines which differ from their federal counterparts. The WV DEP solicited public comments in October 2017, and filed its final report with the WV Legislature in November 2017.

The Chamber's Position

S.B. 619 represents significant regulatory reform legislation that is important to West Virginia’s future. West Virginia’s executive agencies’ must, as a matter of law, engage in a deliberative and thoughtful process to identify those regulatory requirements which are more stringent than necessary to implement federal program counterparts.

The WV Chamber urges the WV Legislature to take affirmative action to require a detailed status report and timeline from the WV Department of Environmental Protection on the actions it is taking to implement its statutory obligations imposed by S.B. 619.

 

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Taxation of Tangible Personal Property

The Chamber has recommended in the past and continues to recommend that the Constitution be amended to allow the Legislature to, by general law, exempt some or all tangible personal property from ad valorem property taxation and, should such legislation be enacted, for the Legislature to provide one or more means by which additional revenues or revenue sources are made available to the local levying bodies to cover the cost of the personal property tax exemption.

An obstacle to capital investment and reinvestment is the property tax on machinery and equipment and other tangible personal property. Business decision makers will ask why should the capital investment be made in West Virginia when the investment can be made across the border in Ohio or Pennsylvania, or in one of a host of other states, that do not tax tangible personal property for property tax purposes or only nominally tax such property. The reality and importance of this question led to Governor Earl Ray Tomblin proposing during the 2012 legislative session and the Legislature enacting a 25-year special property tax valuation methodology to attract a $2 billion ethane cracker facility that was also looking at locating in the state of Pennsylvania, which does not tax tangible personal property. With that enactment, West Virginia could and did compete with Pennsylvania on the tax side. Where West Virginia fell short was not having the requisite number of acres of flat land needed for a site location. While we cannot easily change our geography, we do have the ability to amend the Constitution to allow the Legislature to exempt tangible personal property from property taxes. Now is the time to do just that.

There is common agreement among the stakeholders that the Constitution must be amended before some or all tangible personal property can be exempt from ad valorem property taxation. However, the practical reality is that amending the Constitution is easier said than done. The ensuing pages of this paper discuss some of the reasons why it will be difficult to amend the Constitution. Understanding these challenges also provides opportunities to meet these challenges.

Local Concerns

Representatives of local levying bodies have insisted that before they will support a constitutional amendment, they want to know exactly how the lost revenue will be replaced. While most, if not all, of the local levying bodies have this concern, it is of greater concern to levying bodies in those counties that rely more heavily on taxes levied on tangible personal property to balance their budgets. While application of the state aid formula can, in part, insulate county boards of education from this concern, the state aid formula considers only regular property tax levy collections and does not consider voter-approved excess levies and general obligation bond levies. Consequently, all local levying bodies have this concern to one degree or another.

Scope of Fiscal Problem

The scope of the fiscal problem for local levying bodies is demonstrated by data in the State Tax Department’s recently released revised study of Classified Assessed Valuations Taxes Levied for the 2016 Tax Year. This study shows that the statewide aggregate of state and local property taxes levied on real property was $921,940,780, while the aggregate tax on personal property was $588,623,882. However, just as real property taxes are not evenly distributed among the 55 counties, neither are taxes on tangible personal property equally distributed among the 55 counties.

More specifically, in 11 of the 55 counties, the amount of taxes levied on tangible personal property exceeded the amount of taxes levied on real property in the particular county. And, in 15 additional counties, the taxes levied on tangible personal property approach 50% of total taxes levied on all property in those counties. The following chart prepared from the State Tax Department’s study supports these statements.

***Click Printable Version Below to View Table***

Additionally, in Cabell, Doddridge, Harrison, Marion, Marshall, Monongalia, Ohio, Raleigh and Wetzel Counties, the taxes levied on personal property exceeded $20 million, in each county; and taxes levied on personal property exceeded $56 million in Kanawha County.

Solving the Fiscal Problem Requires Two Solutions

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. Even if the cap on real property tax levies were increased, which we are not suggesting be done, that would not achieve the desired result either, because there is no correlation between the value of real property in a county and the value of tangible personal property in the same county. Moreover, in tax year 2011, property taxes levied on real property aggregated $921,941,780, which suggests that the levy rates on real property would need to increase by more than 64% to generate the amount of replacement revenue needed -- $588,623,882.

Secondary issues of the local levying bodies include, but are not limited to, generating replacement dollars to pay annual debt service on general obligation bonds and replacing excess levy dollars which are used by county boards of education to fund items outside the state aid formula, including, but not limited to, providing additional compensation for teachers and school service personnel and capital improvements. County commissions and municipalities frequently use voter-approved excess levies to fund fire service, emergency ambulance service, additional police personnel and other community improvements. They too have voter-approved general obligation bonds outstanding.

Summary of Issue

In summary, there are no easy answers to this $589 million problem. What we do know is that the states with robust economies do not impose property taxes on business tangible personal property. We also know that personal property taxes affect where and when capital investment is made. This is a consideration in the location of new businesses in West Virginia. It is also a consideration when an existing business decides to modernize or expand in West Virginia. Finally, we also know that to fundamentally change West Virginia’s economy from one dependent on fossil fuels to the new economy, whatever that may be, something needs to be done about the taxation of business tangible personal property.

The Chamber believes that the evidence is clear and overwhelming that Tangible Personal Property taxes are a drag on the State’s economy and the competitiveness of its businesses. The Chamber urges that the Tangible Personal Property tax issue be kept alive and that further proposals to potentially eliminate the tax or lessen its impact be identified. The Chamber maintains that any solution must be statewide in scope – not piecemeal among levying bodies and/or types of taxpayers.

 

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Issue

The West Virginia Legislature should enact state tax policies which are perceived as fair, which are easy and cost effective to administer, generate sufficient revenue for the efficient and effective administration of required services, and which promote job creation and economic growth

Discussion

We applaud the West Virginia Legislature’s ongoing efforts to review the State’s existing tax system. The Chamber desires a tax system meeting the following objectives:

  • Perceived as fair
  • Easy and cost effective to administer
  • Supplies sufficient revenues for the efficient and effective administration of required services
  • Lower and flatter
  • Taxes things that harm public health
  • Eliminates the tax on tangible personal property
  • Promotes job creation and economic growth

Tax reform should be done carefully and responsibly and not in an effort to create winners and losers, but in an overall fiscally responsible manner, comprehensively reviewing each aspect of West Virginia’s tax structure, creating a flatter and broader system overall with lower marginal rates, encouraging economic growth and investment, and fully recognizing the myriad of intended and unintended consequences and implications of any changes to West Virginia’s tax system. To assist in that effort, the Chamber provides some areas where we believe change may be warranted and additional scrutiny is necessary where West Virginia is out of line with a majority of states in its approach to a particular tax or tax policy.

State Tax Climate Overall

In the Tax Foundation’s recently released 2017 State Business Tax Climate Index, West Virginia ranked as having the 18th most competitive tax code overall in the nation. (This compares favorably with the states which are contiguous to West Virginia: Pennsylvania 24th, Ohio 45th, Virginia 33rd, Kentucky 34th, and Maryland 42nd.)

While the State’s overall tax system generally appears competitive, it does place a higher reliance on businesses for tax revenue than our neighboring states and the nation in general. In West Virginia, business tax revenues account for 44.6% of state tax revenues, 75% of local tax revenues, and 51.9% of combined state and local tax revenues. While West Virginia ranks in the bottom half of states with regard to this over-contribution of businesses toward total state tax revenue, the contrast is even starker with regard to businesses’ contribution to local tax revenue. With $3 of every $4 collected in local taxes being paid by businesses instead of individuals, West Virginia is one of the 3 highest states with a disproportionate amount of local taxes being paid by the business community. Businesses continue to pay more in state and local taxes than they receive in benefits. West Virginia businesses pay, on average, $3.35 in taxes for every dollar of government spending which benefits businesses.

West Virginia’s tax reliance on business of 44.6% compares unfavorably to our neighboring states as follows: 41.0% Pennsylvania, 43.1% Ohio, 28.5% Virginia, 34.9% Maryland and 40.5% nationally.

Insurance Premium Tax Rate

West Virginia has some of the highest insurance premium tax rates in the nation. Taxes levied on insurance premiums in West Virginia generate over $156,650,000 per year in revenue, which is distributed to the General Revenue Fund, Municipal Pensions, Volunteer Fire Departments, the State Fire Marshal, and the WV Teachers Retirement System.

The tax rate on Property & Casualty insurance premiums in West Virginia is the highest in the nation at 4.55% (4% tax + 0.55% surcharge = 4.55%). The national average for state premium taxes on property & casualty policies is 2.14%. The most common tax rate nationally is 2.0%. The premium tax rates for property & casualty policies in some of our surrounding states are Kentucky at 2.0%, Virginia at 2.25%, and Ohio at 1.4%.

For fire insurance policies in West Virginia, our premium tax rate of 5.05% is the second highest in the nation (4.5% tax + 0.55% surcharge = 5.05%). The national average for state premium taxes on fire insurance policies is 2.6%. The most common tax rate nationally is 2.0%. The tax rates for fire policies in some of our surrounding states are Kentucky at 2.75%, Virginia at 3.25%, and Ohio at 2.15%.

Retaliatory taxes are additional taxes levied on insurance companies that are domiciled outside of the taxing state in order to burden those “out-of-state” insurers in exactly the same way that the out-of-state insurer’s state of domicile would burden an insurer from the taxing state. It is intended to “level the playing field” by deterring a state from imposing excessive tax on non-domiciled insurance companies. Since WV’s premium taxes are higher than most states, WV’s domestic (“in-state”) insurers are retaliated by other states for the premiums that they write in other states, making policies offered by domestic West Virginia based insurers uncompetitive with those offered from other states.

Tobacco Taxes

Effective July 1, 2016, the tax rates for tobacco products in West Virginia are as follows:

  • Cigarettes -- $1.20 per pack
  • Cigars and smokeless products -- 12% of wholesale price
  • E-tobacco liquids -- 7.5 cents per milliliter

While West Virginia has the second highest rate of smoking deaths in the nation and some of the highest death rates due to cancer, heart disease and other smoking related illnesses, our tobacco tax still remains lower than the national average, and is lower than several of our surrounding states. The median national cigarette tax rate in 2016 was $1.53 per pack. West Virginia’s cigarette tax rate at $1.20 per pack ranks as the 32nd lowest in the nation. Cigarette tax rates in surrounding states are Pennsylvania at $2.60 per pack, Maryland at $2.00, Ohio at $1.60, Kentucky at $0.60, and Virginia at $0.30.

Tangible Personal Property Taxes on Business Inventories, Manufacturing Machinery & Equipment

The West Virginia Chamber supports the elimination of the ad valorem property taxes on tangible personal property and, in particular, the tax on inventory and manufacturing machinery and equipment. This isn’t just a manufacturing industry issue. All West Virginia businesses pay personal property taxes on the value of furnishings, fixtures, equipment and supplies each year. Retailers and most wholesalers additionally pay property taxes on the value of their inventories as of the July 1 assessment date. This particular tax, probably more than others, hurts our West Virginia businesses, fails to promote growth, stifles expansion, discourages job creation, and creates a competitive disadvantage for West Virginia. Its continued existence is a tremendous impediment to economic development. Businesses wishing to locate a new operation obviously consider a state’s tax structure during their due diligence process and our unfavorable comparison to other states on this particular tax is a factor keeping additional businesses from locating here.

Consideration should be given to elimination of this tax because it causes West Virginia businesses to pay taxes on the same machinery and equipment year after year, while discouraging them from upgrading or modernizing their facilities. It discourages West Virginia businesses from expanding or purchasing additional inventory while incentivizing them to move it across the border into another state. The personal property tax is a disincentive to new businesses locating in this state when they compare our tax with other states and can just as easily locate in a state that doesn’t impose this costly and burdensome tax (for example, our neighboring states of Ohio and Pennsylvania). It causes businesses to continue using outdated machinery and equipment (which could be less safe and efficient) rather than upgrading to the newest available technology. It discourages businesses from keeping on hand the inventory they need or that their customers want. It imposes a huge administrative burden, not only on business owners who must report each item of tangible personal property that the business owns as of the July 1 assessment date, but also on state and county assessing officers who must then determine the value of each item of tangible personal property reported each year.

Our local counties and municipalities rely heavily on property tax revenues. Before this tax could be eliminated, the State and local governments would need to identify additional sources of tax revenues to offset revenues lost by its repeal. Further, there are significant State constitutional issues that would have to be addressed as part of this repeal.

Severance Taxes

West Virginia has historically placed heavy reliance on severance taxes and, of the states that impose severance taxes, West Virginia currently has one of the highest severance tax rates in the nation. However, due to environmental and other regulatory pressures, as well as low energy prices coupled with limited demand, the State’s revenues from severance taxes have seen significant declines in recent years. Consideration might be given to reducing the tax burden placed on those involved with natural resources in light of the retired workers compensation liabilities.

Tax Credits to Incentivize Infrastructure Investment and Energy Production

The legislature should consider incentivizing infrastructure investment in broadband and energy production in West Virginia through the use of carefully constructed tax credits, as has been successfully done in other states such as Virginia.

 

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