Budget Beat – One Day Early In Case the Mayans Are Right

Happy holidays from all of us at the WV Center on Budget and Policy!

Good News! Governor Delays Child Care Cuts

This week Governor Tomblin said, “After much discussion with parents and folks in the childcare industry, I decided it’s not in the best interest of West Virginia families to move forward with the scheduled changes to our state’s childcare subsidy. We still have work to do; these programs are not sustainable with our current level of funding, but at this point, I believe it’s best to keep hard-working families in the program and to look for other ways to address the budget shortfalls.” This is good news for West Virginia’s low-income working families and is the topic of a WVCBP report issued last month that describes how this important funding helps families stay out of poverty.

Afterschool Programs Important Part of Preparing Children for the Future

West Virginia’s children face high levels of poverty and this contributes to truancy, childhood obesity, and high school dropout rates. A WVCBP report prepared for the WV Afterschool Network looks at the role afterschool programs can play in alleviating these problems. In addition, it maps the locations of afterschool programs in West Virginia against a range of educational, poverty, health, and economic measures. These maps can help afterschool advocates identify communities that may need additional support and attention. Read report.

Time To Tax Internet Sales

One way to help pay for important programs like childcare is to tax Internet sales. This week, Ted Boettner was quoted in the Charleston Gazette stating that “Each year West Virginia loses millions because it does not tax Internet sales. Like most states, West Virginia taxes the in-store sales of physical books, movies, software and games but when these products are delivered digitally over the Internet, sales taxes do not apply.” Taxing Internet sales would also level the playing field for local small business owners. More information is available in this release from the Center on Budget and Policy Priorities.

Blog Wrap-Up

In his third installment on personal property taxes, Sean O’Leary explained what’s at stake for municipalities if the personal property tax is elimated.

West Virginia has a large share of low-wage occupations. One way to provide better paying jobs for people is through unionization. Read more in Stuart Frazier’s blog post in response to Michigan’s new right-to-work legislation.

Sean also blogged some clarifying information in the discussion over West Virginia being ranked 2nd in terms of tax incentives to attract business. Information reported in this Sunday’s Gazette-Mail claimed that the NY Times article citing the rankings was inaccurate. Regardless of numbers you believe to be correct, West Virginia does little to evaluate the effectiveness of its tax breaks.

Next Budget Beat: January 4. Happy New Year!

Eliminating the Personal Property Tax: Part 3 – What’s at Stake for Municipalities

(Continued from Part 2 – published 12/11/12)

In FY 2012, West Virginia’s 241 municipalities collected an estimated $30 million in personal property tax revenue. While municipal governments are less reliant on property taxes as a source of revenue than are county governments, property taxes still make up around 10 percent of municipal general revenues.

While I can’t break down the amount of revenue each individual municipality would lose from the elimination of the personal property tax with the data available from the State Tax Department, I can make an estimate for how much municipal revenue would be lost in a county. For example, as the chart below shows, municipalities in Barbour County (Belington, Junior, and Phillipi) would lose an estimated combined $140,720, or 41% of their combined property tax revenue. 

County Revenue Lost Share of Total Property Tax Revenue
Barbour $140,720 41%
Berkeley $533,893 15%
Boone $333,088 54%
Braxton $87,866 36%
Brooke $1,115,739 49%
Cabell $2,287,467 31%
Calhoun $35,756 41%
Clay $26,806 41%
Doddridge $33,957 54%
Fayette $541,471 33%
Gilmer $97,201 47%
Grant $81,048 19%
Greenbrier $412,063 21%
Hampshire $40,282 12%
Hancock $737,190 39%
Hardy $153,873 18%
Harrison $2,968,722 34%
Jackson $386,111 43%
Jefferson $288,379 13%
Kanawha $6,967,640 31%
Lewis $143,651 37%
Lincoln $45,629 41%
Logan $370,830 55%
McDowell $825,245 30%
Marion $608,556 37%
Marshall $183,305 30%
Mason $299,731 56%
Mercer $474,448 24%
Mineral $250,155 29%
Mingo $355,453 52%
Monongalia $1,450,691 27%
Monroe $21,776 21%
Morgan $18,133 9%
Nicholas $306,748 39%
Ohio $1,140,708 27%
Pendleton $19,957 17%
Pleasants $79,192 22%
Pocahontas $20,780 11%
Preston $219,713 23%
Putnam $314,665 16%
Raleigh $1,023,880 34%
Randolph $245,218 25%
Ritchie $194,268 43%
Roane $86,652 36%
Summers $54,348 12%
Taylor $116,905 24%
Tucker $66,698 23%
Tyler $133,758 44%
Upshur $323,748 42%
Wayne $442,078 39%
Webster $44,581 41%
Wetzel $284,081 36%
Wirt $17,267 28%
Wood $2,336,794 29%
Wyoming $192,663 51%
Total $29,981,577 31%

Source: WVCBP analysis of State Tax Dept Data

Approximately  $24.7 million of the $30 million in personal property tax revenue was raised through the municipal current levy rates, while $5.3 million was raised through excess levies.

As with county governments, municipalities are restrained in their ability to raise revenue, making $30 million very difficult to replace. A loss of revenue of that magnitude would severely hamper West Virginia’s municipal governments’ ability to continue to provide services like libraries, police and fire protection, hospital care, road repair and maintenance, housing and community development, and recreation.

 

West Virginia Families Benefit From Free Bargaining

Michigan has become the 24th state to pass “right-to-work” legislation. Essentially that means collective bargaining agreements cannot require nonunion employees to pay union dues. However, nonunion employees may still often benefit from wage agreements, a grievance process, and other benefits negotiated by the union.

West Virginia does not have a “right-to-work” law, but some think Michigan’s move may open the door for discussion in the Mountain State. This may threaten many West Virginian unions, which represent over 102,000 workers.

The Economic Policy Institute, a nonpartisan think tank, has released research studying the effects of right-to-work laws on workers. It shows that “right-to-work” legislation reduces pension coverage, has no impact on job growth, and reduces wages and benefits. After controlling for education, experience, and various other factors, the average hourly wage in states with freedom of contract was 3.2 percent higher than “right-to-work” states. Workers were also more likely to have employer-provided health insurance and pensions at their workplace. The map below shows stark differences between right-to-work states and free bargaining states.

Ezra Klein, blogger/editor at the Washington Post, calls “right-to-work” laws “misleading” in that they do not guarantee eager workers an occupation, but instead the right to not contribute to the costs of union representation.

It is important to keep unions strong in West Virginia. Reports from the Center for Economic and Policy Research (CEPR) show that unionization raises the average West Virginian workers wage by almost 23 percent. An average nonunion worker makes $17.13 an hour, while a union member makes $21.83.

As West Virginia leads the region in low-wage occupations, it is vital to point out that healthy unionization strengthens the financial security of working low-income families. According to another study by CEPR, low-wage workers in West Virginia have experienced a 15.8 percent increase in wages if they are in a union. A typical low-wage worker has his/her hourly wage increased from $6.86 to $7.94.

CEPR also concludes that unions help raise wages and benefits for women and young workers. On average, women’s wages are raised by 11.2 percent, are 19 percentage points more likely to have employer-provided health insurance and about 25 percentage points more likely to have an employer-provided pension. Unionization in West Virginia raises a woman’s wages by 8.4 percent, from $11.06 to $12.07.

For young workers—ages 18-29—unionization raises average wages by 12.4 percent. Young workers also are 17 percentage points more likely to have employer-provided health insurance and about 24 percentage points more likely to have an employer-provided pension. In West Virginia, a young worker’s wage increases by 12.4 percent, from $10.21 to $14.12.

HOURLY WAGES

Union

Non-Union

Low-Wage Worker

$7.94

$6.86

Woman Worker

$12.07

$11.06

Young Worker (18-29)

$14.12

$10.21

Source: Center for Economic and Policy Research, 2008

Unions are a vital piece of ensuring a shared prosperity in West Virginia. They are one of the best ways workers in West Virginia can improve their paychecks and provide needed financial security to their families. So called “right-to-work” laws threaten that security and can drive an economic wedge between high earners and low earners, which can only increase our already rising income inequality. By combating anti-worker legislation, we are protecting the rights of workers and contributing to the economic growth of the state.

Not All Tax Incentives are Tax Credits *Update*

This month’s New York Times article on business tax subsidies has attracted plenty of attention in West Virginia, as our state was listed as second in the nation with $857 per resident given out to attract businesses in the state. While state officials defended the state’s use of tax incentives, Phil Kabler in Sunday’s Gazette-Mail created some confusion, claiming that the New York Times “seriously over-inflated tax credits provided by the state.”

Mr. Kabler reported that the state only gave out $81.87 million in tax credits, citing the 2007 Tax Credit Disclosure List, not the $1.5 billion as reported in the New York Times. But the New York Times article did not report that West Virginia gave out $1.5 billion in tax credits, it reported that West Virginia gave out $1.5 billion in tax incentives. Tax incentives (or expenditures), as defined in West Virginia code, are ” exclusions, deductions, tax preferences, credits and deferrals designed to encourage certain kinds of activities or to aid taxpayers in special circumstances,” while tax credits are simply one type of tax incentive. And if you look at the West Virginia page in the New York Times article, you can see that the article breaks down the incentives by type, and West Virginia’s tax credits total $80.7 million, actually underestimating the state’s total.

Further confusion was created earlier in a previous article, which claims the estimate for the state’s direct use sales tax exemption is inaccurate. At a interim committee meeting, Commerce Secretary Keith Burdette defended the state’s business tax incentives. The article reported that Mr. Burdette claimed that the $1.2 billion price tag on the sales tax exemption “failed to note that the vast majority of that amount was in federal tax credits to utility companies to upgrade power plants under the Clean Power Plant and Modernization Act.”

But that is not what Mr. Burdette stated at the hearing. Mr. Burdette said that the upgrades required by the Clean Power Plant and Modernization Act resulted in more equipment purchases than usual, all of which qualified for the sales tax exemption, and those extra purchases inflated the value of the exemption that year. The $1.2 billion was all forgone state sales tax revenue, none of it was federal credits. That number is reflected in the state’s 2010 Tax Expenditure Study, which valued the sales tax exemption at $1.173 billion.

That being said, it is debatable whether or not the direct use exemption should be considered a business tax incentive. State officials note that most states offer a direct use exemption to eliminate double taxation on intermediate goods and services and again on the final goods and services.

But the direct use exemption does not apply to every business, instead it applies to sales of services, machinery, supplies and materials directly used or consumed in the activities of manufacturing, transportation, transmission, communication, production of natural resources, gas storage, generation or production or selling electric power, provision of a public utility service or the operation of a utility business, and to sales of tangible personal property and services directly used or consumed in the activity of research and development.

And, according the the 2010 Tax Expenditure Study, its purpose is not only to eliminate double taxation, but also “encourage investment in equipment and facilities by qualified industries.”

There are also notable states without a direct sales tax exemption, including Wyoming. While coal and natural gas companies in West Virginia do not pay sales tax on the machinery and equipment they purchase in order to mine coal or drill for gas, they do in Wyoming. That is why Wyoming’s effective sales tax rate on coal and gas companies is nearly twenty times higher than West Virginia’s rate.

The direct use exemption meets all the definition of a tax incentive: it is a tax preference for certain taxpayers engaged in certain activities, it is designed to encourage those activities, it saves businesses money compared to other states, and it deprives the state of a substantial amount of revenue. And, like other tax incentives, we do little to evaluate its effectiveness.

 

UPDATE

The 2010 Tax Expenditure study valued the direct use sales tax exemption at $1.1738 billion dollars, the same figure arrived at by the NY Times. According to the Commerce Secretary, this figure is inflated due to federal requirements in the Clean Power Plant and Modernization Act. 

The sales tax exemption is examined every three years, and the 2007 Tax Expenditure Study valued the direct use sales tax exemption at $1.1185 billion, with only a 4.9% increase from 2007 to 2010, which suggests that the 2010 figure was not excessively inflated. The next Tax Expenditure Study is due in early 2013, and is scheduled to examine sales tax expenditures. 

The 2007 Tax Expenditure report can be found at www.transparencywv.org and can be downloaded here – exp2007

Budget Beat – December 14, 2012

Time to Embrace 21st Century on Internet Sales Tax

Each year West Virginia loses millions because it does not tax Internet sales. Like most states, West Virginia taxes the in-store sales of physical books, movies, software, and games, but when these products are delivered digitally over the Internet, sales tax does not apply. A new report by the Center on Budget and Policy Priorities helps explain how West Virginia could bring its sales tax policy into the 21st century by making the sales tax fairer, leveling the playing field for all businesses.

Severance Taxes Important to Counties and Local Governments

Coal production down, natural gas production up. What will this mean to local governments that rely on severance taxes for important programs like education? In an issue brief released this week, the WVCBP projected that even with uncertainty in the coal market, severance taxes should still prove to be a reliable and growing source of revenue for counties for years to come. Read more in the State Journal which quoted this week’s report.

Legislators Talk About Business Tax Breaks

Do tax payers get their money’s worth from tax breaks to businesses? Increased transparency and reporting on this issue would help lawmakers and the public understand if tax give-aways actually create jobs. Responding to a New York Times article ranking West Virginia number 2 in give-aways, legislators heard from West Virginia Commerce Secretary Keith Burdette this week during interims. WVCBP’s Sean O’Leary was quoted in the Charleston Daily Mail saying, “The Times may have painted a bad picture, but in West Virginia we haven’t painted anything at all,” said policy analyst Sean O’Leary. “It’s just a blank canvas.” Read more in this blog post.

More In the News

This week Ted Boettner was interviewed on WV Public Radio about the impact of the fiscal cliff on low-income West Virginia families.

Blog Wrap-Up

In his second installment on personal property taxes, Sean O’Leary explained what’s at stake for counties if the personal property tax is eliminated. Accounting for nearly 20% of all county revenue, personal property taxes are extremely important to counties so they can fund crucial programs and services. Read blog post.

West Virginia tends to rank at the top or bottom of many lists and one you might not be aware of is the Economic Freedom Index. According to the Frazier Institute, West Virginia ranks poorly in terms of Economic Freedom, a low-tax, small government, job-creating utopia where individual affluence is increased. This week Sean ran the numbers and found that there is no evidence for Economically Free states to have greater economic growth than those less free states. Read blog post.

West Virginia also ranked poorly in the health of its safety net. With its high poverty level, the state needs to spend much more on its people in terms of public programs than it currently does. Not only does West Virginia fall below the national average, it has the fourth-weakest safety net in the country. Not good news for the low-income families that are fighting to stay out of poverty. Read Stuart and Ted’s blog post.

In a week of rankings, Forbes put West Virginia near the bottom of its list on the best states in which to do business. But, like the Economic Freedom index, the Forbes ranking is a poor indicator of jobs growth. Read blog post.

Forbes Best States For Business Don’t Always Have the Best Job Growth

Another day, another business climate ranking with a poor result for West Virginia, this time coming from the Forbes 2012 Best States for Business list, which ranks West Virginia as the 45th best state for business. Forbes first started ranking the states in 2006, so like I did earlier this week with the Economic Freedom Index, I compared the states’ rankings in 2006 with their subsequent job growth. And, like the Economic Freedom Index, the Forbes Best States for Business ranking is a pretty poor predictor of job growth.

Overall, the state rankings in 2006 had a very weak correlation with employment growth over the next five years. While Forbes’s correlation of -0.18 was better than the Economic Freedom Index’s correlation of -0.06, it still suggests that there is little to no relationship between a state’s ranking and job growth, as the graph above shows.

The Forbes rankings are a measure of six categories: business costs, labor supply, regulatory environment, current economic climate, growth prospects, and quality of life. I’ll go through each one, and compare the state rankings in each to jobs growth, to see if any of the measures is a decent predictor of job growth. 

Of the six categories, business costs had the strongest relationship to job growth, with a correlation of -0.26, a stronger correlation than the overall ranking. Forbes ranks the state’s business costs using an index including the costs of labor, energy, and taxes. Unfortunately, Forbes has started to include the Tax Foundation’s Location Matters tax burden index in its business cost index, which, regular Evidence Counts readers know, has little relationship to job and economic growth as well. And despite having the strongest relationship, the business cost rankings’s correlation with job growth is still pretty weak.

The category with the second strongest correlation is labor supply, which Forbes measures as levels of educational attainment, population projections, and union membership. Labor supply rankings had a correlation of 0.17 with job growth. However, that relationship was positive, meaning states with a worse ranking for labor supply had better job growth. In any case, a correlation of 0.17, positive or negative, is weak, suggesting there is no obvious relationship between the Forbes measure of labor supply and job growth.

In the interest of time and space, I’ll tackle the next few categories altogether, and skip the charts. The quality of life, regulatory climate, and economic climate indexes all had very weak correlations with job growth. The quality of life measure, which accounted for poverty rates, crime rate, school performance, health and culture and recreational opportunities had a correlation 0f -0.13. The regulatory climate index, which measured “freedom” or the level or existence of labor regulations, health-insurance coverage mandates, occupational licensing, the tort system, and right-to-work laws had a correlation of -0.11. And the economic climate index measured the states’ economic performance of the past five years, and had a correlation of -0.09, suggesting that past performance is not a guarantee of future results.

Finally, the worst performing category was the economic prospects index, which ironically measured  job, income and gross state product growth forecasts over the next five years. The economic prospects index had virtually no relationship to actual job growth, with a correlation of -0.005.

So what does this all tell us? Plenty that we already know. The cost of doing business is a factor in state job growth, but taxes are only a small part of that cost. Quality of life matters just as much as regulatory burden, and neither one matters all that much. And its hard to predict where job growth will happen.  Odds are a ranking on some index isn’t going to tell you. Overreacting to our rankings in these indexes, and trying to conform our policies to what they describe as “best,” isn’t going to have the outcome some might hope for.

West Virginia Must Strengthen Its Safety Net

Our state safety net is a crucial lifeline for families and children in poverty, whether it is providing child care assistance to help a single mom get to work, providing affordable and quality health care to a child or disabled person, or ensuring that kids can get breakfast at school. Unfortunately, West Virginia has one of the weakest safety nets in the country. 

This is according to a recent report by the National Center for Children in Poverty (NCCP) that examined the commitment of state safety nets to addressing poverty.  NCCP measured the strength of each state’s safety net by looking at the share of state spending going to public welfare programs (e.g., TANF, SSI, Medicaid, SCHIP, and other programs) based on each state’s poverty rate. 

According to the report, West Virginia had the 4th weakest safety net in 2008. With only 33.7 percent of West Virginia’s state spending going to public welfare. Nationally, the average was 34.6 percent or slightly higher than West Virginia. Because of West Virginia’s above average poverty rate (17% in 2008), NCCP concluded the state needs to spend about 45.7 percent on its safety net in order to meet the national average.  

Using updated 2010 data provided by U.S. Census Bureau, the table below shows similar results. In 2010, West Virginia spent 35.8 percent of direct state expenditures on safety net programs compared to 36.5 percent nationally. While the slight increase in safety net spending in 2010 was likely due to the lingering effects of the Great Recession, West Virginia still ranks below most states in its commitment to safety-net spending. As the table shows, West Virginia would need to increase safety-net spending by about 13 percent to match the commitment that most states make to their safety nets.    

States with Strong and Weak Safety Net Commitments, 2010

State

Actual Safety Net Spending (%)

Expected Safety Net Spending (%)

Actual-Expected (percentage points)

State Poverty Rate (%)

ALL STATES

36.5

36.5

N/A

N/A

Ten Highest Expenditure States

Minnesota

48.1

31.2

16.9

11.6

New Hampshire

36.3

 22.3

14.0

8.3

Maryland

 37.3

26.6

10.7

9.9

Massachusetts

41.2

30.6

10.6

11.4

Maine

43.9

34.7

9.2

12.9

Nevada

31.6

40.0

8.4

14.9

New Jersey

34.5

27.7

6.8

10.3

Connecticut

32.8

27.2

5.6

10.1

Rhode Island

43.0

 37.6

5.4

14.0

New York

45.4

40.1

5.3

14.9

Ten Lowest Expenditure States

Louisiana

27.6

50.3

-22.7

18.7

Mississippi

40.0

60.2

-20.2

22.4

New Mexico

37.9

54.9

-17.0

20.4

Alabama

34.2

51.1

-16.9

19.0

North Carolina

32.7

47.1

-14.4

17.5

Kentucky

36.9

51.1

-14.2

19.0

South Carolina

34.9

48.9

-14.0

18.2

West Virginia

35.8

48.7

-12.9

18.1

California

30.0

42.5

-12.5

15.8

Colorado

23.7

36.0

-12.3

13.4

Other States

Alaska

21.8

26.6

-4.8

9.9

Arizona

43.6

46.8

-3.2

17.4

Arkansas

39.9

50.6

-10.7

18.8

Delaware

29.0

31.7

-2.7

11.8

Florida

41.4

44.4

-3.0

16.5

Georgia

36.5

48.1

-11.6

17.9

Hawaii

20.4

28.8

-8.4

10.7

Idaho

35.0

42.2

-7.2

15.7

Illinois

39.1

37.1

2.0

13.8

Indiana

38.4

41.2

-2.8

15.3

Iowa

38.1

33.9

4.5

12.6

Kansas

33.4

36.6

-3.2

13.6

Michigan

36.6

45.2

-8.6

16.8

Missouri

37.0

41.1

-4.1

15.3

Montana

27.1

39.3

-12.2

14.6

Nebraska

33.8

34.7

-0.9

12.9

North Dakota

23.7

35.0

-11.3

13.0

Ohio

39.3

42.5

-3.2

15.8

Oklahoma

36.5

45.5

-9.0

16.9

Oregon

32.9

42.5

-9.6

15.8

Pennsylvania

40.4

36.0

4.4

13.4

South Dakota

29.9

38.7

-8.8

14.4

Tennessee

46.9

47.6

-0.7

17.7

Texas

37.8

48.1

-10.3

17.9

Utah

23.8

35.5

-11.7

13.2

Vermont

38.4

34.1

4.3

12.7

Virginia

29.4

29.9

-0.5

11.1

Washington

32.0

36.0

-4.0

13.4

Wisconsin

37.4

35.5

1.9

13.2

Wyoming

23.0

30.1

-7.1

11.2 

Source: National Center on Children and Poverty
Notes: Actual Safety Net Spending is the ratio of public welfare spending to total direct state general expenditure. The ratio of the safety net share of spending is 2.69 to one. For each increase in the state poverty rate of one percentage point, the Expected Safety Net Spending increases by 2.69 percentage points.

West Virginia needs to invest more to prevent more working families and children from falling into poverty. Too many continue slipping through the holes in the safety net. To strengthen the state’s safety net and reduce poverty, West Virginia could join the other states that have expanded their commitment to children in poverty, such as expanding Medicaid, providing work subsidies, enacting a state Earned Income Tax Credit or Child Care Tax Credit, providing additional funds for child care assistance, and getting rid of asset limits on public welfare programs

For West Virginia to be a great place to live, work, and raise a family, it must take concrete steps to reduce the high number of families living in poverty. While this will require federal action, it is clear that state policymakers can also play a vital role in strengthening our state’s safety net.

“Economic Freedom” Index Fails to Predict Economic Performance

Last week, an article in the Daily Mail noted that West Virginia once again ranks poorly in an economic index, this time the Economic Freedom of North America 2012 index, created by the Fraser Institute.  According to the study, West Virginia is one of the least economically free states in the country, and that economic freedom increases affluence. The study defines economic freedom in much the same way that ALEC defines competitiveness: low taxes, weak union membership, low or no minimum wage, as well as low levels of government spending including on health care and social security. And while the study claims that its measure of economic freedom increases affluence, its index has completely failed to state economic performance in that past few years, just like ALEC’s index.

Below, I compare each state’s 2006 Economic Freedom Index rank with four different measures of economic growth from 2006 to 2011: total GDP growth, per capita GDP growth, per capita personal income growth, and total nonfarm employment growth. In the charts the state rankings go from left to right on the horizontal axis, while the measures of economic growth from bottom to top on the vertical axis, and each chart is fitted with a trend line and a measure of correlation.

If the Economic Freedom Index is a strong predictor of economic growth, the trend line should slope down from left to right, as states with poorer rankings would have worse economic growth; and the correlation coefficient would be negative, with coefficients closer to -1 than to 0. So let’s take a look at the results:

 

As the charts show, there is virtually no relationship between a state’s Economic Freedom Ranking and subsequent GDP, per capita GDP, and employment growth. Correlations between the state ranking and those three measures of growth are all nearly zero. There is no tendency for better-ranked states to have better economic growth.

And while “economic freedom” is supposed to increase individual affluence, the last chart shows that the 2006 Economic Freedom Index was actually a decent predictor of per capita income growth, but in the opposite direction. That relationship had a positive correlation of 0.27, with states that had less “economic freedom” in 2006 experiencing higher levels of income growth over the next five years.

Once again, there is more evidence that low tax, limited government policies don’t create the economic growth that they promise.

Eliminating the Personal Property Tax: Part 2 – What’s at Stake for Counties

(continued from Part 1 published 11/28/12)

In FY 2012, the personal property tax produced over an estimated $122 million for the 55 county governments in West Virginia, accounting for more than 30 percent of all county property tax revenue. And since property taxes account for 63 percent of county government revenue, that means the personal property tax accounts for nearly 1/5 of all county government revenue.

However, some counties are much more reliant on personal property tax revenue than others. The table below shows the amount of revenue each county in West Virginia would lose with the elimination of taxes on personal property, and its share of total property tax revenue. As the table shows, in a number of counties, personal property taxes make up more than or close to half of all property tax revenue. Each county would lose, on average, more than $2 million in property tax revenue.

 

County Revenue Lost Share of Total Property Tax Revenue
Barbour $828,945 41%
Berkeley $2,711,613 15%
Boone $6,343,697 54%
Braxton $813,176 36%
Brooke $2,428,044 49%
Cabell $6,935,898 31%
Calhoun $543,677 41%
Clay $557,460 41%
Doddridge $1,336,782 54%
Fayette $3,036,953 33%
Gilmer $1,127,186 47%
Grant $800,960 19%
Greenbrier $1,437,608 21%
Hampshire $664,064 12%
Hancock $1,989,047 39%
Hardy $670,011 18%
Harrison $6,343,546 34%
Jackson $3,114,314 43%
Jefferson $1,438,025 13%
Kanawha $17,997,904 31%
Lewis $1,590,787 37%
Lincoln $1,365,070 41%
Logan $5,973,734 55%
McDowell $3,347,227 30%
Marion $3,057,731 37%
Marshall $1,603,780 30%
Mason $1,947,874 56%
Mercer $1,682,208 24%
Mineral $1,568,444 29%
Mingo $3,075,463 52%
Monongalia $4,463,230 27%
Monroe $305,505 21%
Morgan $338,271 9%
Nicholas $1,747,045 39%
Ohio $2,281,922 27%
Pendleton $245,410 17%
Pleasants $630,480 22%
Pocahontas $335,597 11%
Preston $1,092,046 23%
Putnam $1,874,797 16%
Raleigh $4,732,635 34%
Randolph $1,119,943 25%
Ritchie $1,319,277 43%
Roane $870,455 36%
Summers $212,727 12%
Taylor $738,849 24%
Tucker $546,856 23%
Tyler $792,726 44%
Upshur $1,823,128 42%
Wayne $2,324,380 39%
Webster $597,584 41%
Wetzel $1,207,427 36%
Wirt $227,521 28%
Wood $3,560,720 29%
Wyoming $2,405,357 51%
Total $122,125,113 31.5%

Source: WVCBP analysis of State Tax Dept Data

Approximately $103 million of the $122 million in personal property tax revenue was collected through the county current levy rates, while roughly $19 million was collected through county excess levies.

 Losing such a large chunk of revenue would place county governments throughout the state under an enormous amount of fiscal strain. With local governments limited in what revenue they can raise, counties would struggle to replace the lost revenue. Levy rates on homeowners would certainly have to rise, but even at maximum rates, it is unlikely all the lost revenue could be replaced.  This would threaten the public structures, services, and programs that enhance the quality of life for county residents, as well as the infrastructure provided at the county level that helps businesses thrive and  compete.

 

Budget Beat – December 7, 2012

West Virginia #2 In Tax Give-Aways; Legislature Poised to Take a Look

This Wednesday, December 12, Keith Burdette, Cabinet Secretary Department of Commerce and Russell Fry, Executive Director, Work Force West Virginia will present to the Joint Finance Committee on transparency in tax expenditures to create and retain jobs. In October, the WVCBP released “Every Dollar Counts: The Need for Transparency and Evaluation of Business Tax Incentives.” West Virginia, like many states across the country, has relied heavily on tax incentives to encourage businesses to locate and expand in the state, and to promote economic growth. It is important that we know the actual cost and true economic impact of the state’s business tax expenditures and hopefully this is an issue the legislature will make progress on this session.

 On this very topic, the New York Times this week released a report that West Virginia ranks second in the nation in terms of tax subsidies – at $857 per resident given away to attract businesses to the state. Read much more in this week’s blog post on the subject of the United States of Subsidies. Read about legislators’ reactions to the New York Times study here in an article this week by West Virginia Public News Service.

Work Sharing – Do Unions Oppose It?

Speaking of the state legislature, as reported in last week’s Budget Beat, a committee took up the issue of work sharing during the last interim meetings. A blog post this week delves into the possibility that unions might opposed to the concept in the upcoming session. In fact, there is little push-back from unions due to the fact that work sharing is a voluntary program and, if adopted, saves workers from being laid-off.

WVCBP In the News

Expanding Medicaid is likely to be a big issue during the upcoming legislative session. Governor Tomblin this week was urged to take full advantage of this opportunity to use federal dollars to provide health insurance for thousands of West Virginians. In a Charleston Gazette article, Dr. Dan Doyle citied a WVCBP report that estimates that maximum participation in Medicaid expansion would bring more than $3.7 billion in federal money into the state over six years. In turn the state would pay just 3% of the premium costs while insuring an additional 130,000 people. Read more in this week’s blog post.

 The high unemployment rate of West Virginia’s young people was the topic of a West Virginia Public News Service story this week. The decline in good-paying blue collar jobs has made the need for a college degree even more important and an educated workforce helps attract businesses to the state.

 The decline of coal production will have far-reaching impacts both economically and culturally as highlighted in a State Journal article today. The WVCBP’s work was cited discussing that production declines may not translate to employment declines directly. Miner productivity is expected to fall, meaning producing the same levels of coal will take more man-hours. “In fact, there may be 10,000 more coal jobs in Central Appalachia in 2035 than there were in 2010, despite production falling by 100 million tons, because of falling productivity,” wrote analyst Sean O’Leary.