Industry rep touts tax repeal at commission meeting

PARKERSBURG -- The state could see economic benefits in repealing the personal property tax on business inventory, machinery and equipment, the former Chemours Plant manager told the Wood County Commission on Monday.

Bob Fehrenbacher, representing the West Virginia Manufacturing Association as the past board chairman, talked with the commission about an effort underway to pass the Manufacturing Growth Amendment to the state constitution in the Legislature that would then be put to a vote statewide in the general election, possibly in November 2020. Fehrenbacher has since retired from Chemours.

Plans are to have the legislation, which the association helped write, introduced during the 2020 West Virginia legislative session, which begins in early January.

''This is a topic that has gone back a couple of decades,'' Fehrenbacher said. ''Manufacturing is an important part of the West Virginia economy, particularly Wood County.

''The jobs manufacturers provide to the state are well-paying jobs, averaging $75,000 a year. That is 25 percent over the national average.''

However, the state has some tax burdens placed on manufacturers for the personal property tax on business inventory, machinery and equipment, Fehrenbacher said.

''This proposal addresses this issue,'' he said. ''This tax puts West Virginia at a disadvantage compared to other states in this country and in this region. The proposal is to repeal this tax over a four-year period.''

The amendment would have to get through both houses of the legislature by a two-thirds vote. If that is successful, it is presented to the voters statewide.

If passed, the tax would be removed 25 percent a year over four years.

That money represents $100 million in tax revenue. The state would end up looking for other revenue sources to make up that $25 million a year over four years.

''This revenue is very important to schools, counties and municipalities,'' Fehrenbacher said. ''It just isn't going to be pulled away.

''We would look and give some flexibility to the governor and legislature to identify the replacement revenue.''

Fehrenbacher said they understand the potential impact to the state and especially Wood County, which receives the third highest amount statewide from these taxes.

Commission President Blair Couch said that is where local officials have some concerns.

If someone owns a $100,000 piece of property in Wood County, their property tax is still half of what it is in Ohio. If the personal property tax is eliminated, the state might have to raise real property tax to bring it more in line with surrounding states which could be unpopular with some people, he said.

In order to pass this amendment, lawmakers should include eliminating all of the personal property tax for everyone statewide, Couch said.

The state has given tax breaks to steam coal operators of $12.5 million with the hope the state would see an increase in mining efforts; however, jobs were lost, he said.

''The legislature passes these tax cuts and the state doesn't see anything happen; the increase in jobs they are thinking doesn't happen,'' Couch said.

The state has assisted other businesses in purchasing equipment and leasing it back to the companies to use so they don't have to pay the tax on that equipment, he said.

''The state then starts picking winners and losers,'' Couch said.

Couch told Fehrenbacher there was going to be "a heavy lift" on the association's part to get it to pass.

However, Wood County has lost over 20 manufacturing businesses, including Ames, SABIC (GE Plastics), Johns Manville and others, commissioners said. As the SABIC property is put up for sale, some have hopes a manufacturing facility could come in or the proposed ethane cracker could see fruition, they added

When a manufacturer considers retaining or expanding into other areas, many might pass on West Virginia because of the taxes in place, Fehrenbacher said.

Eliminating the tax will allow companies to have additional resources for their employees and businesses, he said. West Virginia will look more attractive to new business investment because the personal property tax would no longer be a burden to overcome in recruiting companies, he said.

Fehrenbacher said if it passes the legislature, there would be a statewide campaign to build support for the amendment.

''(Right now), West Virginia is one of the highest taxed states in the country for manufacturers, especially on equipment,'' he said. ''The burden for them is higher. It is unattractive.''

He said businesses will spend money where they can get a good return on their investment and make money as a result.

States like Ohio and Pennsylvania have a lower tax burden, Fehrenbacher said.

The total effective tax rate on capital-intensive manufacturing facilities is 15.9 percent compared to 4.2 percent in Pennsylvania, 10.3 percent in Maryland, 9.3 percent in Virginia, 8.9 percent in North Carolina, 11.1 percent in Tennessee, 10.3 percent in Kentucky and 5.1 percent in Ohio.

Couch said that any repeal needs to impact all manufacturers, instead of specific ones.

Fehrenbacher said the proposed amendment sets a level playing field.

''It would make us more competitive than other states,'' he said.