Eliminating the Personal Property Tax: Part 5 - What's at Stake for the State
(Continued from Part 4 - published on 1/4/2013)
While the overwhelming majority of property tax revenue is collected at the local government level, the state of West Virginia does levy a small property tax. In FY 2012, total property taxes levied by the state of West Virginia amounted to $6,042,911, or about 0.4 percent of the total. Of that, approximately $1.8 million was from taxes on personal property.
Property tax revenue only accounts for one-tenth of one percent of the state's revenue. The revenue raised from personal income tax, sales tax, corporate income tax, and severance tax matters much more to the state budget than the revenue from the property tax. But while the state only raised $1.8 million through personal property taxes, the financial impact on the state of eliminating the personal property tax is much larger.
Why? Because as I showed in Part 3, eliminating the personal property tax would result in the state shelling out an additional $117.5 million through the school aid formula. Once that is considered, the total fiscal impact to the state is $119.4 million. That is equal to about three percent of the General Revenue Fund. And with the state's finances already tight, eliminating the personal property tax could result in even more spending cuts and even larger funding gaps than we are currently experiencing.