Government, Monongalia County, Preston County, State Government, West Virginia Legislature

The state Senate property tax plan: A look at the pros and cons

MORGANTOWN — Republican state Senators are hopeful that voters will approve Amendment 2 in November and set the Senate GOP tax reduction plan in motion.

Four proposed amendments to the state Constitution will be on the ballot. Amendment 2 is called the Property Tax Modernization Amendment.

Its official summary of purpose is: “To amend the State Constitution by providing the Legislature with authority to exempt tangible machinery and equipment personal property directly used in business activity and tangible inventory personal property directly used in business activity and personal property tax on motor vehicles from ad valorem property taxation by general law.”

GOP senators unfolded their tax plan during the July special session (which is on pause with no return date yet announced). They did it by killing the governor’s tax bill, passed overwhelmingly in the House, and substituting their own resolution outlining the plan.

Their justification for the plan is that West Virginia is one of a tiny minority of states that tax business inventory, equipment and machinery, and they view those taxes as obstacles to economic development.

Opponents agree the tax is a hindrance but worry that local governments and schools will suffer from the loss of revenue. Some have said the elimination of the vehicle tax was tagged onto the amendment as a bribe to lure favorable votes.

The Senate GOP plan is spelled out in a book released at the start of the special session. Senate Finance chair Eric Tarr, R-Putnam, explained its main points, mentioning that they have bills ready to introduce to carry out the plan.

Here’s how they view the plan: State budgets and state revenue tend to run in parallel, with revenue typically exceeding the budget by $147.7 million. The flat budgets of the past four years have helped lead to the current $1.32 billion surplus.

The idea is to combine four years’ worth of growth — about $590 million — as a fund to make counties whole, should the amendment pass and the counties lose the property tax revenue.

There are three scenarios, based on county tax assessments, designed to replace revenue based on the highest tax assessments in six categories across five fiscal years — 2017-2021 — plus regional jail invoices for certain counties where the assessments are insufficient.

The book shows that Lewis County has seen its personal property tax assessments decline over the past five years. Its 2021 assessment was $3,071,686.07. By totaling the highest assessment for each category across the five years, the plan proposes $5,241,467.26.

At the minimum a county would receive $1 million more than its 2021 assessment to cover jail costs. McDowell is an example of this. Its 2021 assessment was $4.355,536.45.

The total of its six highest assessments is $5,192,473.85. Its 2021 regional jail cost was $731,132.25. Those two figures total $5,923,606.10. The plan proposes $5,355,536.45 — $1 million more than 2021 tax assessments, though less than the high figure plus jail costs.

The plan includes triggers for future income tax cuts. Every time sales tax collections rise by 5%, income taxes will be cut. The plan also includes one-time payments for certain state retirees and a cost-of-living raise.

They don’t want their plan to make counties whole to cost more than $600 million. Because revenues fluctuate, the plan puts $100 million of excess revenue into the Rainy Day Fund to serve as a pool to make counties whole in bad budget years. When that pool dips below $100 million, it gets refilled.

Local plan effects

The book devotes a page to each county. It looks at property tax assessments in six categories: machinery and equipment, furniture and fixtures, leasehold investments, computer equipment, inventory and vehicles.

Here’s how the plan covers Monongalia, Preston and Marion counties.

In 2021, Mon County’s personal property tax assessments were $24,552,078.42. Jail costs were $1,676,108.50. The two figures total $26,228,186.92.

Assessments across the five fiscal years were relatively stable — just above or below the $25 million mark. 2017 was the lowest, at $24,536,160.69. 2020 was the highest, at $26,015,856.09.

The plans adds the highest assessment from each of the six categories for the five-year span to propose a replacement figure of $30,834,041.10 — more than 2021’s assessments plus jail costs.

Preston County has seen a steady rise in tax assessments across the five years, rising from $3,827,593.28 in 2017 to $5,153,600.86 in 2021.

Regional jail costs in 2021 were $909,030, putting 2021’s total at $6,062,630.86.

The total of all the high figures is $5,293,006.99 — not enough to cover assessments plus jail costs, so the plan proposes $6,153,600.86.

Marion County has seen a steady decline across the five years, falling from $13,279,050.27 in 2017 to $11,722,671.29 in 2021.

The 2021 jail costs were $2,390,401.50, putting 2021 assessments plus jail costs at $14,113,072.79. The plan uses the high figures across the five years to propose revenue replacement of $14,508,588.19.

Both the Senate plan and the governor’s plan to lower personal income taxes by 10% draw on budget surpluses. The governor’s plan would cost $255.2 million, one reason the Senate didn’t want to pass it — it would have depleted the amount available for the Senate plan.

They also suggested that average-income households would see more relief from having their vehicle tax eliminated than from the governor’s tax cut. A chart in the book shows that under the governor’s plan, a $10,000 household would see ta relief of $41.67 in 2022. A $50,000 household would see relief of $110.42.


Monongalia County Commissioner Tom Bloom — speaking for himself, not the whole commission — shared an email exchange he had with the West Virginia Center on Budget & Policy, which opposes both tax plans.

In the exchange, Bloom said, “The problem is that the cost could be as high as $750 million and (though he [Tarr] has the funds now), it is not realistic to believe this will continue. He also is not being honest that funds from ARPA were used to backfill the coffers this year.”

The Kanawha County Commission issued a statement opposing Amendment 2 and the Senate plan, listing a number of reasons. One, it would remove the Constitutional protection that provides funding for law enforcement, fire and EMS services, and public education.

The plan could jeopardize $500 million needed to cover those services, resulting in fewer police officers, firefighters, emergency responders and school personnel.

And while the Senate has a plan, the Kanawha Commission said, there is no legislative consensus to guarantee the proposed Senate bills would pass.

“Any legislative plan to provide revenue replacement to local governments and schools must consider the up and down history of West Virginia’s finances, and that state revenues are prone to times of boom or bust, and must further consider the forthcoming healthcare cost crisis that is facing all local governments,” the commission said.

The corporate tax cuts will fall on residents through new sales taxes and fees, the commission said. Voters therefore deserve a codified plan in place, not a work in progress. They call on all local governments to take a public position for or against Amendment 2.

The West Virginia Center on Budget & Policy says in a paper explaining its opposition to Amendment 2 and the Senate plan, “Under normal budget scenarios, the Senate’s promised local government reimbursement would become unsustainable. … The plan is based on unrealistic revenue and spending assumptions that have been highly influenced by the pandemic and the tens of billions of federal aid West Virginia has received in the past two years.”

Factoring out federal pandemic money, general revenue growth has averaged $89.4 million per year, not Tarr’s $147.7 million, the center said. “There is little reason to expect that West Virginia’s recent extraordinary revenue growth will continue, nor will the state be able to maintain a flat budget with no spending increases.”

Slower revenue growth plus millions more needed for Medicaid and PEIA will strain the budget, it said. “While the cost of the local government reimbursement would be growing each year, the amount of resources available to the state to pay for it would be growing smaller.”

The center concludes, “Without major new sources of revenue or painful budget cuts, it is unlikely the Senate would be able to fulfill its promise to local governments.”

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