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Editorial: More transparency would offer better understanding of tax breaks

Dec. 10, 2012 @ 10:40 PM

As a state with a variety of challenges, it's no surprise that West Virginia is willing to extend tax breaks to an employer considering locating in the state or expanding its operations here. Doing so is considered an investment in a long-term benefit to the state's economy.

But a recent report on how much states give in tax breaks has renewed questions about the West Virginia's use of tax incentives and whether the public is adequately informed.

The New York Times report, entitled the "United States of Subsidies," says West Virginia is spending at least $1.57 billion a year on incentive programs. That's the 13th highest volume of spending for incentives among the states, according to the report. Of West Virginia's total, $1.23 billion went toward sales tax refunds, exemptions and discounts; $80.7 million went to state corporate income tax credits, rebates or reductions; and $52.7 million was given through grants, loans or loan guarantees. The single largest tax incentive in the Times data was a $1.17 billion annual sales tax exemption for manufacturers and other firms to purchase equipment and goods used in their production or other business activities.

When broken down by a per-capita basis, West Virginia spends $845 per state resident, which is the second highest spending level behind Alaska. Both numbers suggest that West Virginia is more aggressive in handing out incentives than most other states.

That has not been lost on many lawmakers, who in recent years say they are concerned about the number of tax-break requests coming before them. They also say they have little information about how many tax breaks are handed out and whether the tax incentives are good deals for the state.

Among the critics has been Senate Finance Chairman Roman Prezioso, D-Marion, who told the Daily Mail of Charleston last week that, "We want to know how many jobs are produced when we give a tax credit, and we want to know how much a business grows."

The mere fact that lawmakers and agency officials don't immediately know whether the Times' data on the state's tax incentive programs is accurate suggests that the lawmakers' complaint about lack of information is on target.

In the upcoming legislative session, a way to thoroughly account for the state's incentive programs should be established with these key goals: Making the information available to the public, explaining in detail the costs of incentives, who received them, what commitments the recipients made in return for the incentives, and whether those commitments were or are being kept.

There's no question that the use of incentives are a necessary component of West Virginia's efforts to compete economically. But there's also no question the workings of those incentives -- and a way to evaluate their effectiveness -- should be a transparent process.

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