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Biz tax break measure falls

Mar. 14, 2010 @ 12:21 AM

CHARLESTON -- Gov. Joe Manchin's attempt to lessen the tax burden on businesses by amending the West Virginia Constitution faltered Saturday during the final hours of the Legislature's 2010 session.

The amendment, proposed in the form of a resolution, would have exempted businesses from paying at least some of the personal property tax on equipment and inventory.

Under the resolution, the question would have been forwarded to voters as a statewide referendum on November's general election ballot. Had voters approved the amendment, the Legislature would have set tax break guidelines and the date from when purchased equipment or inventory would qualify.

Manchin billed the resolution as a way to jumpstart job development in West Virginia by encouraging new businesses to relocate to the Mountain State and existing ones to expand.

He also has cited how the property tax burden on businesses in border states is far less than that of West Virginia. Businesses in the state pay more than $13,000 in personal property taxes per $1 million worth of equipment and inventory, according to the West Virginia Chamber of Commerce. In Kentucky, businesses pay about $1,500 per $1 million.

"Obviously, the governor's very disappointed in the ouctome," Manchin spokesman Matt Turner said. "He still feels it is a very good bill that's about economic development and creating opportunities for businesses, large and small, and making them competitive with neighboring states."

Even though the resolution passed the House 95-1 on Feb. 17, worries that business tax breaks would translate to dwindling revenues for county governments and public school districts grew stronger as the resolution made its way through the Senate.

"We can't find any support for this proposal from any constituency," Senate Judiciary Chairman Jeff Kessler said after the Senate Rules Committee removed the resolution from the chamber's active calendar Saturday morning. "Counties don't want it. I haven't found much support for it from the manufacturing community. The education community is distressed as well as labor.

"The silence has been deafening, quite frankly, as to the support of this bill."

Organizations representing county clerks, assessors and county commissions took varying stances on the resolution during the session, but had joined in opposition to it during the past few days.

"Our main objection all along was that it didn't address lost revenue," said Patti Hamilton, executive director of the West Virginia Association of Counties. "It's essentially a phase-out of property tax revenue for businesses with absolutely nothing identified to replace it for the counties."

Property taxes provide most of the revenue needed for providing essential county services and remain a key source of public school funding, Hamilton said.

Approximately 93 percent of the $1.4 billion distributed from property taxes last year went to counties and public schools. Commercial inventory and equipment provided almost $274 million of that amount.

To calm counties' fears, Manchin's proposal would have let counties decide whether to exempt businesses from the personal property tax rolls had the amendment passed in November. But the effort backfired when several senators argued that the provision would force counties to compete against one another.

"There's no way we could recruit businesses to the counties that don't have the exemption," said Sen. Karen Facemyer, R-Jackson. "They would go to the county that has the best deal."

Facemyer offered an amendment to the resolution in the Senate Finance Committee on Friday that removed the county flexibility and made the constitutional amendment statewide.

Cabell and Wayne delegates, all of whom voted for the resolution, said they were surprised by its demise in the Senate.

Delegate Doug Reynolds, D-Cabell, said he doesn't buy the "county-against-county" argument that was made by county officials. West Virginia has so many border counties that officials should be more worried about competing against communities in neighboring states, he said.

"From a baseline view, the whole tax package for businesses is better in our surrounding states," Reynolds said. "We have to look at the big picture."

Reynolds said the constitutional amendment deserves at least a detailed review during the Legislature's interim meetings and possibly a spot on a special session agenda later this year.

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