Tax Reform: Inventory tax should be phased out
West Virginia legislators must keep their noses to the grindstone on tax reform.
This has not been a good year for tax reform in our state, where we surely need something to help struggling families and give businesses an incentive to create jobs. Republicans in the Legislature had an idea for sweeping improvement by phasing out the personal income tax, but it crashed and burned this spring.
During legislative interim meetings last month, new tax strategies were discussed. One that seems to be gaining interest is eliminating the tax on business inventories.
“We have to get rid of that tax if we want to attract industry,” Commerce Secretary Woody Thrasher told lawmakers. But, Thrasher added, there is the problem of the $250 million a year in revenue brought in by the tax.
Much of that money goes to county governments and, as Thrasher put it, “You can’t just leave (them) high and dry.”
Fortunately, state legislators are closer to their constituents and local leaders than are members of Congress, who are too fond of offering tax breaks and new programs at the expense of local and state governments.
How to handle the inventory tax, then?
Economist Mike Caryl had a suggestion: Don’t eliminate the tax all at once. Phase it out during a period of years.
That seemed to work well with the sales tax on food, which was eliminated gradually by that method. Another phase-out would work even better if our bloated bureaucracy was slimming down during the same time period.
Clearly, lawmakers and Gov. Jim Justice should not put a new fiscal burden on the backs of counties. Regardless of the timetable for doing away with the inventory tax, that needs to be a priority.
But Caryl’s idea has merit. It could help create new jobs and thus, improve tax bases at both the county and state levels. Lawmakers and Justice should give the strategy careful consideration, with an eye to passing the necessary legislation early next year.