JUST CUT TAXES AND WIN AMENDMENT
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1 JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X OF THE WEST VIRGINIA CONSTITUTION HOUSE JOINT RESOLUTION 106/ SENATE JOINT RESOLUTION 9 GOVERNOR JIM JUSTICE COMMERCE SECRETARY WOODY THRASHER REVENUE SECRETARY DAVE HARDY
2 PLEASE NOTE: January 29, 2018: This presentation is based on the provisions of House Joint Resolution 106 and Senate Joint Resolution 9, which have been submitted to the West Virginia Legislature. The Constitutional Amendment set forth in these resolutions must be approved by a two-thirds vote of both Houses of the Legislature and signed by the Governor before it can be presented to the voters for their approval. Consequently, the precise language of the Constitutional Amendment that appears on the General Election ballot may not be identical to the provisions as set forth herein.
3 THE PAST West Virginia leaders have been talking for decades about how destructive the industrial personal property tax is to the economic health of our state. Removal was a goal of Governors Underwood and Manchin Legislation was introduced in 2010 and 2011 West Virginia Forward mentions the tax as impediment to economic growth JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 2
4 THE BIG IDEA I want to grow West Virginia s economy by amending the State s Constitution to eliminate a hurdle to economic growth in the Mountain State with NO NEW TAXES. Governor Justice On the Amendment JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 3
5 THE WHY Article X, Section I. taxation shall be equal and uniform throughout the State, and all property both real and personal, shall be taxed in proportion to its value JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 4
6 THE HOW Article XIV, Section 2. Both houses of the Legislature must approve the amendment by two-thirds of the elected members AND The amendment must be approved by the majority of voters at a special or general election. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 5
7 THE DATA Industrial inventory peaked in FY 2013, and has steadily declined since. Industrial machinery and equipment peaked in FY 2014, and has steadily declined since. The total for both peaked in FY 2015, and has steadily declined since. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 6
8 THE DATA $200 Industrial Inventory & Equipment Property Tax Yield $ Millions $190 $180 $170 $160 $150 $140 $130 $120 $110 $ JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 7
9 THE DATA Manufacturing Employment Trends: West Virginia down 43% 1.10 Index to 1990= WV JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 8
10 Avg. Annual Employment THE DATA 80,000 WV MANUFACTURING EMPLOYMENT ( ) 70,000 60,000 72,189 68,648 64,587 63,014 62,219 61,003 59,124 56,460 50,648 50,000 49,066 49,453 49,039 48,364 47,786 47,724 46,774 40,000 30,000 20,000 10, Year (Source: Workforce West Virginia, LMI Section, Retrieved 2018) West Virginia Manufacturing average annual employment declined from 72,189 in 2001 to 46,774 in 2016, a decline of 25,415 jobs, representing a 35% decline. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 9
11 THE NEED West Virginia is one of only seven states that taxes industrial business inventory. West Virginia is also an outlier in that it levies a personal property tax on industrial machinery and equipment. This is a disincentive to new capital investment for new and existing companies in West Virginia. Ohio and Pennsylvania do not have the tax. Virginia, Kentucky and North Carolina can abate at the local level. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 10
12 THE PROBLEM A tax on a mobile asset can lead to it being moved. This tax makes West Virginia uncompetitive for early site searches. This is an issue for every major capital investment in recent memory. PILOTS are used at times, but are a cumbersome workaround. Professional site consultants frequently point to this tax as a barrier to economic growth. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 11
13 THE AMENDMENT New (purchased after 7/1/19) tangible industrial machinery, equipment and inventory personal property is exempt from property taxation. Other such machinery and equipment is assessed on 7/1/16 and remains at that number. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 12
14 THE AMENDMENT Starting on 7/1/20 (FY 2021), the phase out (currently 60%) of said industrial properties SHALL be reduced to : FISCAL YEAR NEW % JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 13
15 THE COST The taxes at issue generate approximately $140 million dollars per year. The Amendment recognizes that key stakeholders such as counties, public education, municipalities, and other levying bodies, must be made whole. Replaces the revenue to the counties, cities and public education by a Constitutional guarantee of $140 million in $20 million increments for FY , AND The $140 million is guaranteed in perpetuity thereafter. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 14
16 THE SIX-YEAR PLAN Starting in FY 2021 Funding to levying bodies of $20 million additional base per year to replace reduced local property tax revenue This funding is based on a conservative general revenue growth rate of 3%, which was calculated using a 30-year average. Equates to approximately $130 million in new revenue and additional savings from government efficiencies No anticipated new taxes to fund this plan JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 15
17 THE PATH FORWARD This Amendment is a clear way to move West Virginia ahead as recommended by the West Virginia Forward economic strategy study by West Virginia University, Marshall University, and the West Virginia Department of Commerce. Worked with McKinsey and Company, one of the world s best management consulting firms, on the report. It directly eliminates West Virginia s greatest impediment to job growth. It recognizes and makes key stakeholders whole. The well-thought-out proposal protects the State budget. JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 16
18 WEST VIRGINIA WINS One thing we ve got to ensure is that education and our counties and our cities won t get hurt. We can do that. We can absolutely do that with this Amendment. Governor Justice State of the State Address 2018 JUST CUT TAXES AND WIN AMENDMENT TO ARTICLE X 17
19 JUST CUT TAXES AND WIN
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